oligopoly game price makers meet price takers abstract the paper studies an oligopoly game where firms can choose between price taking and price making strategies on a mixed market price takers are always better off than price makers though the profits of both types decline in the number of price takers we investigate and confront two possibilities of firms decisions about their types forward looking equilibrium reasoning and backward looking individual learning we find that the cournot outcome is the only equilibrium prediction and it is learnable if firms are sufficiently sensitive to profit differences however with a larger number of firms a unilateral deviation from cournot behavior becomes profitable under learning this incentive creates a space for permanent oscillations over different markets with a positive but low number of price takers

bootstrapping the data envelopment analysis malmquist productivity index this paper presents a bootstrap approach to calculate confidence intervals for firm specific malmquist productivity indices obtained from data envelopment analysis dea models the bootstrap is easily implemented and allows identification of production units that have significant productivity changes an application using data from swedish eye care departments is included we find that 40 of departments have significant progress in productivity whereas only 10 of the departments have a significant regress in productivity this differs from the original results where about half the sample have estimates of progress and the other half have estimates of regress in productivity

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

cooperation through imitation abstract this paper characterizes long run outcomes for broad classes of symmetric games when players select actions on the basis of average historical performance received wisdom suggests that when agent s interests are partially opposed behavior is excessively competitive keeping up with the jones lowers everyones welfare here we study the long run consequences of imitative behavior when agents have sufficiently long memories and evaluate past actions in terms of weighted average payoff imitation robustly leads to cooperative outcomes with highest symmetric payoffs in the long run furthermore lengthening memory reinforces this effect this provides a rationale for example for collusive cartel like behavior without collusive intent

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

portfolio performance evaluation in a mean variance skewness framework abstract astronomical amounts of money are being invested in financial markets consequently the evaluation of portfolio performance has created a great deal of interest among practitioners as well as academic researchers the literature suggests that portfolio efficiency based on mean variance skewness is more desirable than the one based on mean variance however there are no well established procedures to measure efficiency in this framework mainly due to the computational difficulties the aim of this paper is to develop a portfolio performance measure based on mean variance skewness framework by utilizing a non parametric efficiency analysis tool namely data envelopment analysis

resampling dea estimates of investment fund performance abstract data envelopment analysis dea is attractive for comparing investment funds because it handles different characteristics of fund distribution and gives a way to rank funds there is substantial literature applying dea to funds based on the time series of funds returns this article looks at the issue of uncertainty in the resulting dea efficiency estimates investigating consistency and bias it uses the bootstrap to develop stochastic dea models for funds derive confidence intervals and develop techniques to compare and rank funds and represent the ranking it investigates how to deal with autocorrelation in the time series and considers models that deal with correlation in the funds returns

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

an evolutionary interpretation of van huyck battalio and beil s experimental results on coordination this paper proposes an adaptive interpretation of the results of some recent experiments with repeated tacit coordination games these experiments revealed several behavioral regularities including a systematic discrimination between strict nash equilibria in certain games that appear to be driven by strategic uncertainty and are not explained by traditional equilibrium refinements the observed patterns of discrimination correspond closely to predictions based on maynard smith s notion of evolutionary stability an adaptive model in the spirit of the evolutionary dynamics but recognizing the important differences between learning in human populations and evolution promises to yield a unified explanation of the results journal of economic literature classification numbers 020 026

efficiency of mutual funds and portfolio performance measurement a non parametric approach abstract in finance portfolio performance assessment is an important area of research the two popular indices of performance are the jensen s alpha and the sharpe index however there are a number of shortcomings of the above measures that have been highlighted in the literature we propose a new measure of performance that seeks to address the limitations of the earlier indices the new index is calculated by employing a well known method in operations research called data envelopment analysis we show the benefits of the proposed approach and assess the performance of mutual funds we compare the results with traditional indices of performance an interesting result we obtain is that the mutual funds are all approximately mean variance efficient

economic impacts of the construction of a transport corridor a multi level and multi approach case study for the construction of the a1 highway in the netherlands bruinsma f r rienstra s a and rietveld p 1997 economic impacts of the construction of a transport corridor a multi level and multi approach case study for the construction of the a1 highway in the netherlands reg studies 31 391 402 in this paper the relation between the construction of highway infrastructure and regional economic development is analysed at two spatial levels the level of regions and individual entrepreneurs three different approaches are used a regional labour market model a reference region approach and a survey among entrepreneurs both the regional models gave no clear indication of an impact of highway construction on regional economic development at the level of individual entrepreneurs the impact of the highway construction was clearly positive for the level of corporate investments the number of employees the perceived accessibility travel time and the accuracy in delivery times perceptions deserve attention in studies of this type because behaviour is not on

the urban rural manufacturing shift in the european community the paper documents for the first time at the european community scale a relative shift of manufacturing industry from highly urbanised to rural regions during the 1970s this shift is evident in

imitators and optimizers in cournot oligopoly we analyze a symmetric n firm cournot oligopoly with a heterogeneous popu lation of optimizers and imitators imitators mimic the output decision of the most successful firms of the previous round a la vega redondo 1997 optimizers play a myopic best response to the opponents previous output firms are allowed to make mistakes and deviate from the decision rules with a small probability apply ing stochastic stability analysis we find that the long run distribution converges to a recurrent set of states in which imitators are better o than are optimizers this finding appears to be robust even when optimizers are more sophisticated it suggests that imitators drive optimizers out of the market contradicting a funda mental conjecture by friedman 1953

self efficacy beliefs and imitation a two armed bandit experiment abstract it is generally believed that individuals imitate others to gain status minimise regret or simply ameliorate their performance psychology provides a complementary explanation imitation becomes appealing when agents have little faith in their abilities we investigate the extent to which self efficacy beliefs affect agents propensities to imitate others we propose an experimental task which is a modified version of the two armed bandit we measure participants self assessed self efficacy then study individual learning subsequently we measure how individuals use the information they gather observing a randomly selected group leader we find that in stable environments a 1 increase in individual self efficacy reduces the propensity to imitate others by 3

modes of economizing behavior experimental evidence abstract in addition to more or less elaborate explicity rational procedures economic choices in reality are frequently made by trial and error imitation following an authority habit thoughtless impulse and hunch presenting results from a number of experiments that explicity incorporate decision cost this paper explores the extent to which these alternative decision making modes can lead to optimal choices

data envelopment analysis of mutual funds based on second order stochastic dominance abstract although data envelopment analysis dea has been extensively used to assess the performance of mutual funds mf most of the approaches overestimate the risk associated to the endogenous benchmark portfolio this is because in the conventional dea technology the risk of the target portfolio is computed as a linear combination of the risk of the assessed mf this neglects the important effects of portfolio diversification other approaches based on mean variance or mean variance skewness are non linear we propose to combine dea with stochastic dominance criteria thus in this paper six distinct dea like linear programming lp models are proposed for computing relative efficiency scores consistent in the sense of necessity with second order stochastic dominance ssd the aim is that being ssd efficient the obtained target portfolio should be an optimal benchmark for any rational risk averse investor the proposed models are compared with several related approaches from the literature

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

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

a positive approach to non cooperative games abstract population steady states are defined for non cooperative games played repeatedly by individuals drawn from large populations these steady states balance the tendencies of immigration to an emigration from strategies according to certain simple measures of their relative performances approximate values for these steady states are computed for some examples and appear intuitively more plausible as descriptors of play than do nash equilibria

cournot vs walras a reappraisal through simulations abstract best reply behavior in cournot oligopolies generally leads to cournot nash equilibrium but imitative behavior selects the walrasian equilibrium as the unique stochastically stable state previous work alos ferrer 2004 showed that in the presence of memory imitative behavior leads to a non trivial dynamics selecting all quantities between the cournot and walrasian outcomes however the scope of previous results was limited to specific assumptions on demand and cost functions and did not provide information on the shape of the distribution of outcomes we use computational simulations to address these limitations we show that the selection result for non trivial memory holds beyond the set of well behaved cournot games previously analyzed further we find that in cournot games the limit distribution of long run outcomes is highly skewed towards the walrasian quantity although longer memory increases the importance of the cournot equilibrium the competitive outcome remains the dominant prediction

evolution in economic games abstract this paper examines the conditions under which evolutionary processes select equilibrium strategies of agents or firms under plausible dynamics optimal selection takes place provided that economic agents are small relative to the environment that is each such agent has a negligible effect on others payoffs however when this assumption is not met survival need not imply optimality examples in the contexts of bargaining bidding and market competition are presented

do hedge funds deliver alpha a bayesian and bootstrap analysis abstract using a robust bootstrap procedure we find that top hedge fund performance cannot be explained by luck and hedge fund performance persists at annual horizons moreover we show that bayesian measures which help overcome the short sample problem inherent in hedge fund returns lead to superior performance predictability sorting on bayesian alphas relative to ols alphas yields a 5 5 per year increase in the alpha of the spread between the top and bottom hedge fund deciles our results are robust and relevant to investors as they are neither confined to small funds nor driven by incubation bias backfill bias or serial correlation

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

experimentation imitation and stochastic stability abstract do boundedly rational agents repeatedly playing a symmetric game with a unique symmetric equilibrium learn over time to play it in this paper we model the dynamic interaction of two types of such agents experimenters and imitators whose behavior is characterized by simple rules of thumb we find that the stochastic process describing their play isstable in the large it converges globally and with probability one to a compact neighborhood of the equilibrium however its local behavior near the equilibrium depends in interesting ways on the details of the model journal of economic literatureclassification number d83

testing scale efficiency in dea models a bootstrapping approach this paper presents a method for estimation and test of firm specific scale efficiency using data envelopment analysis dea the use of a simple bootstrap algorithm is proposed to perform firm specific inference for scale efficiency an empirical application using swedish hospital data is provided it is found that about 40 of the departments were scale efficient according to the original results however for about one third of those departments the hypothesis of scale efficiency could be rejected

a dynamic model of equilibrium selection in signaling markets in his work on signaling spence proposed a dynamic model of a market in which a buyer revises prices in light of experience and in which sellers with private information about their types choose utility maximizing signals given these prices we follow spence s suggestion of introducing perturbations into the resulting dynamic process in a broad class of markets our model selects a separating equilibrium outcome if and only if the equilibrium outcome satisfies a version of the undefeated equilibrium concept whereas a pooling equilibrium outcome is selected if and only if the equilibrium outcome is both undefeated and satisfiesd1

diversification consistent data envelopment analysis with general deviation measures abstract we propose new efficiency tests which are based on traditional dea models and take into account portfolio diversification the goal is to identify the investment opportunities that perform well without specifying our attitude to risk we use general deviation measures as the inputs and return measures as the outputs we discuss the choice of the set of investment opportunities including portfolios with limited number of assets we compare the optimal values efficiency scores of all proposed tests leading to the relations between the sets of efficient opportunities strength of the tests is then discussed we test the efficiency of 25 world financial indices using new dea models with cvar deviation measures

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

cooperation as a result of learning with aspiration levels abstract it is shown that a win stay lose shift behavior rule with endogenous aspiration levels yields cooperation in a certain class of games interaction takes place in many groups markets or locations simultaneously and the aspiration level in each round equals the current population average the class of games includes the prisoner s dilemma and cournot oligopoly and thus yields an explanation for cooperation and collusion

stochastic adaptation in finite games played by heterogeneous populations we analyze stochastic adaptation in finite n player games played by heterogeneous populations containing best repliers better repliers and imitators individuals select strategies by applying a

dea frontier improvement and portfolio rebalancing an application of china mutual funds on considering sustainability information disclosure abstract data envelopment analysis dea has been a widely used methodology for evaluating the relative performance of portfolios extensive work has appeared for realizing the role of dea in the aspect of assessing portfolio performance and deriving the relative rankings however the role of providing realizable benchmarks is not fully explored in the existing literatures most importantly the dea based portfolio performance evaluation methods developed in the existing literatures can hardly provide support for fund managers in pursuing sustainability performance in this paper we first propose a dea frontier improvement approach under the mean variance framework this approach provides investor with a rebalancing strategy as well as an improved dea frontier which approximates the portfolio efficient frontier better than the traditional dea model does then this approach is extended to a general return risk framework our in sample simulation results verify the effectiveness of the proposed approach for a wide range of applications in addition the out of sample tests show that the rebalancing investment strategies can achieve higher sharpe ratios and sortino ratios than those of the original ones finally we apply the proposed approach to evaluate mutual fund performance in china with the consideration of sustainability information disclosure we construct a disclosure index to indicate the extent of sustainable information disclosure of each mutual fund the results show that the proposed approach provides not only investment recommendations but also references for constructing sustainable green funds

are profit maximisers the best survivors a darwinian model of economic natural selection abstract this paper demonstrates that the friedman conjecture that profit maximisation summarises appropriately the conditions for firm survival is not generally true if firms have market power profit maximisers are not necessarily the best survivors because of the possibility of spiteful behaviour of the following kind say a firm forgoes profit maximisation and thus decreases its survival chances but its deviation from maximisation harms its profit maximising competitors more than itself though the firm will be less likely to survive than it would if it maximised its profits it will still be more likely to survive than its competitors

data envelopment analysis models of investment funds abstract this paper develops theory missing in the sizable literature that uses data envelopment analysis to construct return risk ratios for investment funds it explores the production possibility set of the investment funds to identify an appropriate form of returns to scale it discusses what risk and return measures can justifiably be combined and how to deal with negative risks and identifies suitable sets of measures it identifies the problems of failing to deal with diversification and develops an iterative approximation procedure to deal with it it identifies relationships between diversification coherent measures of risk and stochastic dominance it shows how the iterative procedure makes a practical difference using monthly returns of 30 hedge funds over the same time period it discusses possible shortcomings of the procedure and offers directions for future research

social learning in market games abstract our experiments test the effect of different information settings on firms behaviour in duopoly price and quantity games we find that when players have full information on their rivals choices the imitation rule prevails and such learning behaviour induces more competitive outcomes in the cournot market designs by the same token when information on the average industrial profit is provided there is evidence of an increase in cooperation and the majority of players experiment with new strategies when their payoff falls below the average profit palomino f vega redondo f 1999 dixon h d 2000

portfolio selection in multidimensional general and partial moment space abstract this paper develops a general approach for the single period portfolio optimization problem in a multidimensional general and partial moment space a shortage function is defined that looks for possible increases in odd moments and decreases in even moments a main result is that this shortage function ensures sufficient conditions for global optimality it also forms a natural basis for developing tests on the influence of additional moments furthermore a link is made with an approximation of an arbitrary order of a general indirect utility function this non parametric efficiency measurement framework permits to differentiate mainly between portfolio efficiency and allocative efficiency finally information can in principle be inferred about the revealed risk aversion prudence temperance and other higher order risk characteristics of investors

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