failures in contingent reasoning the role of uncertainty we propose a new channel to account for the difficulties of individuals with contingent reasoning the presence of uncertainty when moving from an environment with one state of known value to one with multiple possible values two changes occur first the number of values to consider increases second the value of the state is uncertain we show in an experiment that this lack of certainty or the loss of the power of certainty impedes payoff maximization and that it accounts for a substantial portion of the difficulties with contingent reasoning

does the resource curse hold for growth in genuine income as well summary existing studies analyzing the so called resource curse hypothesis regress growth in gross domestic product gdp on some measure of resource intensity this is problematic as gdp counts natural and other capital depreciation as income deducting depreciation from gdp to arrive at genuine income we test whether the curse still holds true we find supporting evidence but the growth disadvantage of resource intensive economies is slightly weaker in terms of genuine income than gdp we suggest that this provides additional but somewhat weak and limited evidence in support of those who argue that the curse is partly due to unsustainable overconsumption

self enforcing intergenerational transfers and the provision of education this paper considers intra family financing of human capital under the assumptions that individuals are selfish and binding contracts are not feasible cooperation among family members is possible through a family norm a family social capital which prescribes the obligations to be met at each stage in life and sanctions for those who deviate we characterize the set of self enforcing transfers and show that there is a downward bias in the family provision of education this gives a rationale for public action as a remedy to the lack of commitment between selfish family members

dynamic production teams with strategic behavior abstract we analyze if intergenerational teams reveal workers productivities some uncertainty on agents productivities persists when i each agent must work independently or ii technological shocks are agent specific in compulsory teams however when technological shocks are team specific in compulsory teams each worker s productivity is revealed when agents choose to work independently or in teams that problem falls in the class of dynamic games elective teams are preferred by high productivity young workers when the technological shocks are agent specific and maximize the expected utility of a young worker when shocks are team specific

cooperation in ongoing organizations this paper argues that overlapping games can provide a natural theory of long lived organizations it shows that participation in organizations of infinite duration changes the incentives of agents with finite lives and will induce more cooperation than a static model would predict after developing the general theory we apply it to the description of career paths in organizations and show that it can be optimal to give the youngest workers the most arduous tasks

policymakers horizon and the sustainability of international cooperation abstract this paper examines the impact of policymakers horizon on the sustainability of international cooperation we describe a prisoners dilemma game between two infinitely lived countries run by policymakers we show that re election incentives can act as a discipline device making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely lived policymakers we also show that when voting suffers from a recency bias policymakers may have incentives to collude to get re elected and term limits may help international cooperation

the role of party reputation in the formation of policy abstract this paper shows that a party can credibly establish a platform more moderate than the ideology of its members and thereby raise the probability that the party s nominee wins the election a lame duck incumbent optimally implements his party s platform in order to maintain his party s reputation for having a moderate platform this increases the likelihood that his party retains power when candidates credibly locate themselves in policy space via this mechanism we show that if candidates are sufficiently impatient then their policies are bounded away from one another the policy convergence result is not robust

the dispersion of employees wage increases and firm performance previous studies examining intra firm wage dispersion and firm performance have focused on wage levels the authors of this study argue that for purposes of comparing wage dispersion s positive inc

decision making with naive advice in many of the decisions we make we rely on the advice of others who have preceded us for example before we buy a car choose a dentist choose a spouse find a school for our children sign on to a retirement plan etc we usually ask the advice of others who have experience with such decisions the same is true when we make major financial decisions here people easily take advice from their fellow workers or relatives as to how to choose stock balance a portfolio or save for their child s education although some advice we get is from experts most of the time we make our decisions relying only on the rather uninformed word of mouth advice we get from our friends or neighbors we call this aive advice in this paper i will outline a set of experimental results that indicate that word of mouth advice is a very powerful force in shaping the decisions that people make and tends to push those decisions in the direction of the predictions of the rational theory

privacy and time consistent optimal labor income taxation abstract incomplete information is a commitment device for time consistency problems in the context of time consistent optimal labor income taxation privacy can lead to a pareto superior outcome and increases the effectiveness of public education as a second best policy

false prophet or genuine savior assessing the effects of economic openness on sustainable development 1980 99 while many herald globalization the increasing interconnectedness of national economies to be associated with rising standards of living across the globe others fear its effects on sustainability antiglobalization forces and environ mentalists view these developments as a threat to the welfare of future generations because of profligate and excessive current consumption this study is the first to estimate the effects of dependence on trade foreign direct investment fdi and an index of economic freedom on the world bank s measure of sustainability the gen uine savings rate which measures the rate at which investment in the total stock of manufactured human and natural capital exceeds its depreciation contrary to pessi mists fears our indicators of economic openness show positive effects on sustain ability results that are robust to sample size testing procedure and several alternative specifications the results support those who suggest that distorted economies tend to be both inefficient and damaging to future generations if increasing trade fdi and economic freedom are hallmarks of globalization then worries about its effects on future well being are misplaced

the value of familiarity effects of knowledge and objective signals on willingness to pay for a public good we design and conduct a field experiment in which treated subjects receive a precise and objective signal regarding their knowledge about a public good before estimating their wtp for it we find that the causal effect of objective signals about the accuracy of a subject s knowledge for a public good can dramatically affect their valuation for it treatment caused a significant increase of 85 129 in wtp for well informed individuals we find no such effect for less informed subjects our results imply that wtp estimates for public goods are not only a function of true information states of the respondents but beliefs about those information states

air pollution and green accounts a simple model treating air emissions as cumulative pollutants is used to derive measures of green net national product the model implies that pollution emissions are properly valued at their marginal social costs in the measurement of green nnp the level of genuine savings net savings less the value of resource depletion and pollution emissions is shown to provide a useful indicator of sustainable development recent figures on the social costs of fuel cycles are used to derive genuine savings measures for the uk and other european nations several countries had negative genuine savings during the 1980s

voting on pensions a survey abstract the paper presents a nonexhaustive survey of the literature designed to explain emergence size and political sustainability of pay as you go pension systems it proposes a simple framework of analysis a small open two overlapping generation economy model around which some variants are displayed dictatorship of the median voter is assumed the text is organized to answer the following questions i do political equilibria with payg pension schemes exist ii why do they emerge iii what are the conditions for the participation constraint of the pension game to be verified and finally iv what is the size of the pension system chosen by the median voter and how is this size influenced by an exogenous e g demographic shock

optimal transmission switching sensitivity analysis and extensions in this paper we continue to analyze optimal dispatch of generation and transmission topology to meet load as a mixed integer program mip with binary variables representing the state of the transmission element line or transformer previous research showed a 25 savings by dispatching the ieee 118 bus test case this paper is an extension of that work it presents how changing the topology affects nodal prices load payment generation revenues cost and rents congestion rents and flowgate prices results indicate that changing the topology to cut costs typically results in lower load payments and higher generation rents for this network computational issues are also discussed

the evolution of cooperation through imitation we study evolutionarily stable outcomes for a class of games that admit cooperation and conflict as possible nash equilibria we make use of two ideas existing strategies are more likely to be imitated than new strategies are to be introduced players are able to identify opponents behavior prior to interaction the long run evolutionary limit is efficient for the case of perfect recognition of opponents behavior for the case of imperfect recognition efficiency is not achieved and long run outcomes are more efficient the more accurate is the information strategies that emerge in the long run are those where players reward opponents who are likely to play the same way and punish opponents who are likely to play differently

green accounting and economic policy abstract through the lens of conventional national accounting resource depletion and natural environment degradation often appear misleadingly as desirable economic growth the old system of national accounts sna has been revised and a set of environmental satellite accounts proposed certain weaknesses however pervade the new proposals the conventional measurements remain largely unaltered and the satellite accounts are of unclear purpose and unnecessarily complex as proposed they rely on the valuation of environmental stocks while the economically more important flow accounts to their detriment are to be derived indirectly from changes in stock values the sna the paper stresses is primarily an economic framework incapable of capturing all environmental change and the national accounts are far more useful economically than environmentally greening the accounts would be optional for most affluent countries whose overriding environmental concern is pollution this can be addressed directly through taxation and regulation pollution information in satellite accounts can indeed be valuable but revised and fully integrated resource accounting is a priority concern for those developing countries that are running down natural resources and for which conventional accounting distorts macroeconomic measurement analysis and policy the paper argues that green accounting can only ensure income sometimes called weak sustainability which should be considered as a step leading ultimately to an ecological or stronger sustainability

a foundation for markov equilibria in sequential games with finite social memory we study stochastic games with an infinite horizon and sequential moves played by an arbitrary number of players we assume that social memory is finite every player except possibly one is finitely lived and cannot observe events that are sufficiently far back in the past this class of games includes games between a long run player and a sequence of short run players and games with overlapping generations of players an equilibrium is purifiable if some close by behaviour is consistent with equilibrium when agents payoffs in each period are perturbed additively and independently we show that only markov equilibria are purifiable when social memory is finite thus if a game has at most one long run player all purifiable equilibria are markov

commitment deference and legislative instutions j nformational theories of legislative institutions have demonstrated the potential collective gains from committee specialization due to the use of restrictive amendment procedures for these 5 benefits to be realized however the floor majority must overcome a commitment problem i demonstrate that in a multistage game majority rule combined with the fact that generations of legislators overlap allows the legislature to solve the commitment problem and to sustain legislative norms and institutions even if legislators are finitely lived the model suggests that rather than restrictive amendment procedures it is the committee s expectation of floor deference that sustains committee specialization as a consequence legislative norms may collapse due to an unexpected influx of new members even if the distribution of preferences in the legislature does not change finally i discuss consequences for a comparative study of legislative institutions

net national product as an indicator of sustainability net national product nnp can potentially serve several objectives among others to measure value added and to be an indicator of welfare in the aftermath of the world commission on environment and development however it also seems important to investigate whether the concept of nnp can serve as an indicator of sustainability my point of departure following hicks 1946 ch 14 is therefore to require that nnp should measure what can be consumed in the present period without reducing future consumption possibilities and in line with this to argue that the nnp should equal the maximum per capita consumption level that can be sustained if sufficiently many facilitating assumptions are made then a concept of nnp that serves as an exact indicator of sustainability can easily be constructed for instance for a closed economy with a constant population a stationary technology and with only one capital good it follows that the present does not reduce future consumption possibilities if and only if it does not decrease the stock of the single capital good hence under the assumption that the one capital good k is identical to the one consumption good x nnp defined as y x k measures the maximal sustainable consumption at time t because then x y is equivalent to k the purpose of this note is to establish that with multiple capital goods it is not in general possible to construct an exact indicator of sustainability on the

kin groups and reciprocity a model of credit transactions in ghana this paper studies kinship band networks as capital market institutions membership in a community where individuals are dynastically linked has two effects on informal credit first the nonanonymity of the dynastic link allows to sanction the defaulters offspring and induce compliance even in short term interactions social enforcement second preferential agreements can arise in which kin members condition their behavior on the characteristics of a player s predecessor expecting others to do the same with their offspring reciprocity these effects are incorporated in an olg game with endogenous matching between lenders and borrowers and tested using household level data from ghana

costly transfer institutions and the core in an overlapping generations model we examine an overlapping generations economy with no pre existing intergenerational transfers and study the set of transfer institutions in the core of the economy that is institutions that would be admissible for the first generation to create and would not be rejected by any future generation institution building is assumed to be costly we allow the cost of creating a new institution to vary with the size of the transfer it institutes and show that all institutions in the core must cost as much to build as they transfer in fact the core set is nonempty if and only if the institution that supports the golden rule transfer costs as much to create as it transfers the core set is characterized for various cost functions we conclude that costs associated with the creation of transfer institutions are essential to make intergenerational transfers socially viable but they may induce the choice of institutions making suboptimal transfers

learning from the behavior of others conformity fads and informational cascades learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior for example why do people tend to converge on similar behavior why is mass behavior prone to error and fads the authors argue that the theory of observational learning and particularly of informational cascades has much to offer economics business strategy political science and the study of criminal behavior

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

cooperative equilibria in finite horizon noncooperative supergames abstract it is well known that cooperative outcomes can be supported by noncooperative equilibrium strategy combinations in games that are infinitely repeated however the example of the repeated prisoner s dilemma has led people to conclude that such cooperative outcomes cannot be sustained if the game is repeated finitely often in this paper it is proved that the belief about finitely repeated games is false conditions are given that allow the existence of cooperative outcomes in finitely repeated games that are supported by subgame perfect noncooperative equilibrium strategies

measuring sustainable development some empirical evidence for france from eight alternative indicators abstract this paper presents results from a time series analysis of eight measures of development and or sustainability for france the measures chosen are green national net product genuine savings ecological footprint indicator of sustainable economic welfare genuine progress indicator pollution sensitive human development indicator sustainable human development indicator and french dashboard on sustainable development a theoretical description of each index highlights their advantages and drawbacks underlining the fact that no indicator is perfect and no one can give an exhaustive view of sustainable development therefore the analysis of various indicators is necessary to evaluate sustainable development with accuracy empirical results of measures of well being show that french development was improving between 1990 and 2000 concerning sustainability indicators support different conclusions it seems that french development was weakly sustainable but unsustainable in the strong sense over the period examined

trigger price regulation we consider the difficulty of achieving efficient prices and investments when returns on a public utility s projects are vulnerable to opportunistic ratemaking we model the long term relationship between a firm and its regulator as a time dependent supergame in which the regulator sets price ceilings to maximize surplus and the firm invests to maximize profit we find history dependent strategies that support self enforcing mutually beneficial equilibria equilibrium payoffs are close to the planning solution provided interest rates are small enough and capital depreciates fast enough we concentrate on trigger price regulation where in response to inefficient behavior the regulator cuts price down to operating cost and the firm curtails investment this mechanism performs well even with production economies and with restrictions on players threats

resource accounting in measures of unsustainability challenging the world bank s conclusions the world bank has recently published acomprehensive study of environmental and resourceaccounting covering 103 countries world bank1997a the study concludes that many sub saharan northern african and middle east countries have hadnegative genuine saving rates over the last 20years and therefore fail to pass the test of weaksustainability this paper argues that the bank sconclusions depend on a method for computing usercosts from resource exploitation that is challengedby two competing ones the el serafy method andthe method of repetto et al and is inferior to oneof its rivals resource rents are re computed usingthe el serafy method for 14 countries and thesub saharan and northern african and middle eastregions the results are that both regions andalmost all countries either stop exhibiting signs ofunsustainability or their unsustainability can beexplained without having recourse to resourceaccounting however for congo ecuador gabon nigeria mauritania and trinidad and tobago there isa lesson these countries did not adequately use theopportunities they were given through their naturalresource endowments and should learn from theirmistake for the future depletion of their remainingreserves of natural resources

rejoinder to kritikos and bolle making indenture viable the extortionary power of pre commitment in iterated prisoner s dilemma abstract kritikos and bolle s approach is still flawed but a viable indenture game can still readily be structured within the context of iterated prisoner s dilemma

between ostrom and nordhaus the research landscape of sustainability economics abstract we survey the emerging research area of sustainability economics through a quantitative full text analysis of peer reviewed journal publications from 1987 to 2013 to identify relevant contributions we draw on existing definitions of sustainability economics for a keyword based identification strategy a combined focus on a the human nature relationship b the long term uncertain future c normative orientation towards sustainability and d economic analysis our analysis of a random subsample of 343 relevant papers reveals that i sustainability economics is a rapidly developing research area ii while theoretical contributions shaped the area in earlier years applied work now constitutes the largest share of contributions iii the research landscape can be clustered into eleven research clusters these range from participatory governance of social ecological systems associated with the work of elinor ostrom to questions of intertemporal allocation and distribution applied to climate economics associated with the work of william nordhaus iv the research area is broad in scope and heterogeneous and there is relatively little interaction between important clusters v relevant contributions are published in more than 100 journals ten journals publish half of all contributions led by ecological economics and 40 appear in non economics journals underscoring the importance of interdisciplinary dialogue

rational turnout the neglected role of groups rational choice theories have difficulty accounting for individual participation in collective action voting is among the acts hardest to explain consumption benefits have been proposed to account for nonzero turnout the model presented here establishes a political investment basis for these benefits i argue that voters often act not in isolation but as part of groups with shared interests while individuals still vote because of consumption benefits arising from the act of voting some of these consumption benefits are provided by group leaders out of collective benefits received by the group in return for its votes the collective benefit comes from a candidate adopting policy positions closer to those of the group in passing i show that the widespread availability of public opinion polling increases the candidate s incentive to shift position finally some data from recent off year elections are shown to be consistent with the model

information cascades in the laboratory when a series of individuals with private information announce public predictions initial conformity can create an information cascade in which later predictions match the early announcements this paper reports an experiment in which private signals are draws from an unobserved urn subjects make predictions in sequence and are paid if they correctly guess which of two urns was used for the draws if initial decisions coincide then it is rational for subsequent decisionmakers to follow the established pattern regardless of their private information rational cascades formed in most periods in which such an imbalance occurred copyright 1997 by american economic association

stereotypes and false consensus how financial professionals predict risk preferences abstract we analyze the prediction of risk preferences of others using an artefactual field experiment with financial professionals and students for their prediction the subjects receive information on multiple demographic characteristics and a self assessment of risk taking of the target when analyzing the predictions we find three significant effects subjects use the demographic information for stereotyping as well as the target s self assessment on risk taking and we find a considerable false consensus effect the false consensus effect is the strongest for experienced professionals regarding the prediction s accuracy we find that the forecasts of the professionals are more accurate than the forecasts of the students

tractable transmission topology control using sensitivity analysis the standard economic generation dispatch ed minimizes generation costs subject to transmission constraints where the status of each line i e open or closed is fixed recent research shows that by optimally dispatching the network topology along with generation resources significant congestion costs may be avoided optimal topology control i e appropriate changes of transmission line status for real sized power networks requires the solution of a computationally intractable mixed integer linear program however it appears that much of the cost savings may be attained by changing the status of just a few lines this paper proposes tractable transmission topology control policies which employ sensitivity information readily available from the ed to select candidate lines to change status while maintaining system connectivity implementation on the ieee 118 bus test system found that our best performing policy captured an average of 96 of the potential cost savings moreover the limited computational effort required suggests that these policies could be employed in real system operations

augmenting the world bank s estimates ireland s genuine savings through boom and bust abstract the world bank computes estimates of genuine savings gs a leading indicator of sustainable development for most countries a well established literature has called for methodological enhancement this paper presents augmented estimates of irish gs throughout a period of unprecedented economic expansion and decline 1990 2016 a time series constructed predominantly from national sources includes the most comprehensive coverage of pollutants in the literature surveyed we apply a novel method to aid the property rights designation assessment required for transboundary pollutant accounting in sharp contrast to the world bank s estimates our findings suggest that a modern developed economy can exhibit signs of unsustainability furthermore extended environmental damages drive these results suggesting expanded country specific gs may diverge considerably from the world bank s estimates we find rapid economic development and rapid declines in environmental damages can occur concurrently and on the transition away from an unsustainable path

oil reserve life and the influence of crude oil prices an analysis of texas reserves oil producing exploration and production companies generate revenue from reserves which from any given well are depleting over time the reserve life index measures how long reserves would last at the current production rate if there were no additions to reserves in this study we examine the time series behavior of the reserve life index for each of the twelve onshore oil producing districts in texas specifically we model the relationship between reserve life and the real price of oil within a nonlinear ardl framework among the results we find evidence of both long run and short run asymmetries in the response of reserve life to increases decreases in real oil prices further the magnitude of the effect is greater for positive changes in real oil prices than for negative changes in real oil prices the findings are important to operators investors and policymakers interested in sustainability

tradition and common property management since management of a common property resource can be undertaken only by a government of finitely lived agents studying the behaviour of such governments is a natural way to study common property management i propose that we regard the choice of management objective by such a government as a move in a game of sequential agents given this framework it is shown that subgame perfect equilibria exist in which successive governments choose the same traditional management objective these strategies enable an economy to overcome any intergenerational externality thus following a tradition of conservation may be a rational response to an intergenerational externality tradition et gestion d une ressource en propriete commune puisque la gestion d une

the impact of advice on women s and men s selection into competition we conduct a laboratory experiment to study how advice by a more experienced and better informed person affects an individual s entry into a real effort tournament and the gender gap our experiment is motivated by the concerns raised by approaching the gender gap through affirmative action policies overall advice improves the entry decision of subjects in that forgone earnings due to wrong entry decisions go significantly down the improvements are mainly driven by increased entry of strong performing women who also become more confident and reduced entry of weak performing men we find that the overall gender gap persists even though it disappears among low and strong performers the persistence is due to an emerging gender gap among intermediate performers driven by women men following more the advice to stay out of enter the tournament in this performance group this paper was accepted by uri gneezy behavioral economics

joint tax evasion tax evasion analysis typically assumes that evasion involves individual taxpayers responding to some given policies however evading taxes could require the collaboration of at least two taxpayers detection depends on the costly avoidance activities of both transacting partners an increase in sanctions leads to a direct increase in the expected cost of a transaction in the illegal sector but it may also increase the incentive for the partners to cooperate in avoiding detection the total cost of transacting in the illegal sector can fall and tax evasion may increase the policy implications of this phenomenon are considered jel classification h26 l evasion fiscale collective dans les analyses de l evasion fiscale on suppose habituellement que le payeur de taxe fait face a un ensemble donne de politiques auxquelles il reagit pourtant dans le cas des transactions marchandes l evasion fiscale n est possible que si plusieurs agents cooperent ensemble la probabilite que l evasion soit detectee depend alors des efforts que chacun fait pour la cacher dans un tel contexte de plus lourdes sanctions accroissent le cout espere des transactions illegales mais peuvent aussi indirectement accroitre l incitation pour les partenaires a cooperer pour cacher leur activite illegale il en resulte que le cout total des transactions illegales peut diminuer et l evasion fiscale augmenter nous etudions les implications de ce phenomene

a repeated game with finitely lived overlapping generations of players abstract this paper analyzes infinitely repeated noncooperative games where the players have finite but overlapping terms thus the nature of the game remains constant but the identity of the players changes over time this type of scenario depicts the situation facing firm managers in regulated or oligopolistic environments despite finite lives which lead players to always choose opportunistic actions at the end of their careers it is shown that there are equilibria where cooperative behavior emerges in this noncooperative setting further a folk theorem result is obtained any individually rational payoffs can be realized as a subgame perfect equilibrium journal of economic literature classification numbers 022 026

genuine savings leading indicator of sustainable development abstract the world bank recently began publishing estimates of countries genuine savings a comprehensive measure of net investment across all forms of capital natural and human as well as produced this article presents the first empirical investigation of the consistency of the bank s estimates with the hypothesis that net investment should equal the difference between a country s average future consumption and its current consumption results show that the bank s estimates are consistent only with weak versions of this hypothesis and then only for developing countries moreover a simple autoregressive integrated moving average arima model outperforms any net investment measure comprehensive or conventional as a predictor of the difference between current and future consumption in sum the bank s net investment estimates tend to move in the same direction as the difference between current and average future consumption in developing countries but they have little value for predicting the mag

bowling alone a review essay abstract this paper is a critical review of robert putnam s influential analysis of social capital in america bowling alone the review argues that bowling alone reflects many of the strengths and weaknesses of the social capital literature like this literature bowling alone describes a remarkable number of facts concerning community life in america at the same time the book suffers from many of the conceptual problems and empirical weaknesses that have plagued the social capital literature i conclude that bowling alone does not succeed in establishing the importance of social capital in understanding various socioeconomic phenomena it purports to explain

sunspots in the laboratory we show that extrinsic or nonfundamental uncertainty influences markets in a controlled environment this work provides the first direct evidence of sunspot equilibria these equilibria require a common understanding of the semantics of the sunspot variable and they appear to be sensitive to the flow of information sunspots always occur in a closed book call market but they happen only occasionally in a double auction where inframarginal bids and offers are observable

behind the revolving door a new view of public utility regulation regulatory officials frequently work for firms they regulate after they leave office this revolving door has been the subject of much scrutiny owing to the natural suspicion of corruption in a time dependent supergame i take a strategic look behind the revolving door and find it can lead to improved performance of regulated industries when firm managers and regulators have finite and concurrent terms investment incentives are minimal staggered terms and revolving doors can result in improved performance of regulated firms when each side s actions at each date are contingent on past outcomes

forward and backward intergenerational goods why is social security good for the environment this paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods figs such as education and the environment when agents are selfish or exhibit paternalistic altruism we show that backward intergenerational goods bigs such as social security play a crucial role in sustaining investment in figs without them investment is inefficiently low but with them optimal investment is possible we also show that making the provision of bigs mandatory crowds out the voluntary provision of figs and that population aging can increase investment in figs

repeated games played by overlapping generations of players the present paper tries to explain cooperative behaviour in an organization run by a sequence of long but finitely lived agents we show that the folk theorem holds for infinitely repeated games with overlapping generations of finitely lived players any mutually beneficial outcome can approximately be sustained if the player s life span and the overlapping periods are long enough the result is stronger than the usual folk theorems in that it employs no assumption on the stage game such as the full dimensionality of payoff set or multiplicity of equilibria

cooperation in stochastic olg games abstract this paper builds on cremer s quart j econ 101 1986 33 seminal analysis which shows that almost complete cooperation can be achieved as an equilibrium in a game played by overlapping generations of players if the institution in which players cooperate is infinitely lived we analyze a similar model in which the costs of cooperation are subject to random shocks even if these random shocks are very small the range of parameters for which cooperation can be sustained is decreased considerably in comparison to the deterministic case furthermore we show how the efficient outcome can be approximated if the level of cooperation can be varied continuously and the cooperation technology has decreasing or constant returns to scale while this is not possible in the case of increasing returns to scale

recursive contracts firm longevity and rat races an experimental analysis abstract this paper reports the results from a laboratory experiment which investigates the structure of contracts that emerge in overlapping generation firms where future ownership is a perquisite of employment workers in the young generation are offered employment contracts designed by the firms owners who belong to the old generation when old employed workers are granted ownership rights as long as the firm continues to operate in line with theoretical predictions the results indicate that as firm longevity increases the recursive nature of the contracts leads to a rat race characterized by low wages high effort levels and rent dissipation these results have important implications for the optimal management of long lived firms such as partnerships

smart flexible just in time transmission and flowgate bidding there is currently a national push to create a smarter grid currently the full control of transmission assets is not built in network optimization models with more sophisticated modeling of transmission assets it is possible to better utilize the current infrastructure to improve the social welfare co optimizing the generation with the network topology has been shown to reduce the total dispatch cost in this paper we propose the concept of just in time transmission this concept is predicated on the fact that transmission that is a detriment to network efficiency can be kept offline when not needed and with the proper smart grid advanced technology can be switched back into service once there is a disturbance we determine which lines to have offline based on the optimal transmission switching model previously proposed a secondary topic of this paper focuses on flowgate bidding approved by the federal energy regulatory commission and implemented within the spp and nyiso networks flowgate bidding is defined as allowing a line s flow to exceed its rated capacity for a short period of time for a set penalty i e price we demonstrate the effectiveness of these models by testing them on large scale iso network models

capital gains and net national product in open economies it is shown within a given framework that with the world economy following an egalitarian path the aggregate capital gains being positive is equivalent to the interest rate tending to decrease this result is of importance for the concept of net national product in open economies in particular with positive aggregate capital gains an open economy cannot sustain consuming the return on its capital stocks since some part of the return must be used to augment the country s national wealth it is established that a country s share of world wide sustainable consumption equals its share of worldwide wealth

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

bitcoin 1 bitcoin 2 an experiment in privately issued outside monies the value of bitcoin depends upon self fulfilling beliefs that are hard to pin down we demonstrate this for the case where bitcoin is the only form of money in the economy and then generalize the message to the case of multiple bitcoin clones and or a competing sovereign currency some aspects of the indeterminacy we describe would no longer hold if bitcoin were an interesting bearing object

congestion management through topological corrections a case study of central western europe the integration of an increasing amount of renewable generation within europe is posing operational challenges that require various balancing actions system operators therefore need to rely increasingly on the active control of the transmission network transmission topology control is a fast and economical option to add flexibility to the transmission system we model the current methodology for controlling congestion in the central western european cwe market and quantify the benefits of topology control we also compare the results with a nodal pricing model our computational results suggest that topology control can significantly reduce congestion management costs under the current market coupling regime whereas the benefits of topology control are limited under nodal pricing topology control emerges as an attractive and implementable means of managing congestion as it provides a significant percentage of the cost savings that would be achieved by overhauling the existing european market design and shifting to a nodal pricing regime

a failure to communicate an experimental investigation of the effects of advice on strategic play abstract we investigate why two person teams beat the truth wins benchmark in signaling games cooper and kagel 2005 cooper and kagel 2009 by studying an advice treatment where advisees have the benefit of two individuals insight but not bilateral communication the tw benchmark states that the performance of a team for problems with a demonstrable correct solution should be no worse than the performance of its most able individual if one individual solves the problem the team solves it as well advisees whose advisors play strategically have significantly higher levels of strategic play but fall well short of the truth wins benchmark as i many advisors who play strategically do not provide advice to this effect and ii many advisees fail to follow sound advice effect i is largely attributable to female advisors who are far less likely to provide advice than men whether or not advice contains a clear explanation for its effectiveness has no effect on the likelihood of advisees strategic play a result at odds with the idea that economic agents regularly consider all the available alternatives

cooperation in an overlapping generations experiment abstract recent theoretical work shows that folk theorems can be developed for infinite overlapping generations games cooperation in such games can be sustained as a nash equilibrium but of course there are other equilibria this paper investigates experimentally whether cooperation actually occurs in a simple overlapping generations game subjects both play the game and formulate strategies our main finding is that subjects fail to exploit the intertemporal structure of the game even when we provided subjects with a recommendation to play the grim trigger strategy most of the subjects still employed safe history independent strategies journal of economic literature classification numbers c72 c92 d90

hicksian income from resource extraction in an open economy we derive a measure of national income defined in terms of maximum sustainable per capita consumption if population and interest rates are constant the income generated by natural resource extraction is the return on resource wealth defined as the present value of future resource rents with a growing population or declining interest rate sustainability requires net increases in wealth over time the income from extraction of nonrenewable resources can exceed resource rents contrary to the conclusions of el serafy 1989 and repetto et al 1989 finally we present an example illustrating the hazard of consuming the full increment of hicksian income

on the strength of corporate cultures abstract we model corporate culture s as production technologies for which employees have to undertake culture specific investments that improve their effectiveness at a later date the organization can adopt cultural changes that make this investment partially redundant this leads to under investment however as agents invest more the organization s opportunity cost of a change increases which in turn increases each agents incentives to invest this externality among agents leads to multiple equilibria otherwise similar organizations can thus exhibit either high investment levels and low probability of changes strong culture or low investment levels and high probability of changes weak culture we also explore some implications for the nature and management of corporate culture

intergenerational conflicts of interest and seniority systems in organizations this paper studies the role of a proposed seniority system in an organization the organization consists of at least three overlapping generations of short lived members and chooses either a shortsighted or a farsighted action in each period this results in intergenerational conflicts of interest the old generation desires to obtain an immediate profit while the middle and young generations have incentives to invest for future profits we use a model of infinitely repeated games and demonstrate that the seniority system solves these conflicts in the sense that the farsighted action profile is sustainable in equilibrium

on the methodology of isew gpi and related measures some constructive suggestions and some doubt on the threshold hypothesis existing country studies of the index of sustainable economic welfare isew the genuine progress indicator gpi and related measures while sharing the same basic methodological approach differ with respect to the valuation of important items this paper provides a critical but constructive discussion of the various methods used for the valuation of non renewable resource depletion and long term environmental damage and for the weighting of consumption expenditures for income inequalities several recommendations are given on how to improve the methodology for future updates of existing studies or for the construction of new measures sensitivity analysis shows that if these recommendations are followed for the valuation of resource depletion and long term environmental damage then the so called threshold hypothesis which seems to have gained empirical support from all studies undertaken so far fails to materialise this suggests that as far as factors related to the environment are concerned the widening gap between isew and gpi on the one hand and gross national product gnp on the other might be an artefact of highly contestable methodological assumptions 2000 elsevier science b v all rights reserved

gerontocracy revisited unilateral transfer to the young may benefit the middle aged according to conventional wisdom intergenerational transfers can survive in the absence of altruism only if the old are net recipients i prove that this need not hold in an overlapping generations model with a fixed factor for example the middle aged owning land may gain by providing public education even when they cannot tax the young and when the young face no credit market constraints this requires that labor is not mobile furthermore establishing public education may benefit only the generation which pays for education twice first for itself and then for the next generation