23 research outputs found
Stigma and Social Control
No full textSocial interactions provide a set of incentives for regulating individual behavior. Chief among these is stigma, the status loss and discrimination that results from the display of stigmatized attributes or behaviors. The stigmatization of behavior is the enforcement mechanism behind social norms. This paper models the incentive effects of stigmatization in the context of undertaking criminal acts. Stigma is a flow cost of uncertain duration which varies negatively with the number of stigmatized individuals. Criminal opportunities arrive randomly and an equilibrium model describes the conditions under which each individual chooses the behavior that, if detected, is stigmatized. The comparative static analysis of stigma costs differs from that of conventional penalties. One surprising result with important policy implications is that stigma costs of long duration will lead to increased crime rates.Crime, Stigma, Social norms
Uniqueness of the Equilibrium in First-Price Auctions
No full textIf the value cumulative distribution functions are log-concave at the highest lower extremity of their supports of the first-price auction in the asymmetric indepent private values model.
Uniqueness of the Equilibrium in First-Price Auctions
No full textIf the value cumulative distribution functions are log-concave at the highest lower extremity of their supports, a simple geometric argument establishes the uniqueness of the equilibrium of the first-price auction in the asymmetric independent private value model.
"Liquidity Motives of Holding Money under Investment Risk: A Dynamic Analysis"
No full textJones and Ostroy (1984) argue that money,as an asset of the least transaction cost, offers exibility to its holder, which other assets cannot provide. We extend the idea of Jones and Ostroy into a truely dynamic framework of infinite horizon with a risk-neutral decision-maker. We then investigate the effect of an increase in investment risk on the demand for liquidity a la Jones and Ostroy. In particular, we prove that the opitmal strategy exists, that it has a reservation property, and that the reservation value increases when investment risk increases in the sense of a mean-preserving spread. While the effect of a mean-preserving spread on the reservation value is unambiguous, its e ect on money demand is ambiguous. We then provide conditions on increasing investment risk under which money demand unambiguously increases.
When Does Learning in Games Generate Convergence to Nash Equilibria? The Role of Supermodularity in an Experimental Setting
No full textThis study clarifies the conditions under which learning in games produces convergence to Nash equilibria in practice. Previous work has identified theoretical conditions under which various stylized learning processes achieve convergence. One technical condition is supermodularity, which is closely related to the more familiar concept of strategic complementarities. We experimentally investigate the role of supermodularity in achieving convergence through learning. Using a game from the literature on solutions to externalities, we systematically vary a free parameter below, close to, at and beyond the threshold of supermodularity to assess its effects on convergence. We find that supermodular and ¡°near-supermodular¡± games converge significantly better than those far below the threshold. From a little below the threshold to the threshold, the improvement is statistically insignificant. Within the class of supermodular games, increasing the parameter far beyond the threshold does not significantly improve convergence. Simulation shows that while most experimental results persist in the long run, some become more pronounced.learning, supermodular games
Equilibrium Bias of Technology
No full textThe study of the bias of new technologies is important both as part of the analysis of the nature of technology adoption and the direction of technological change, and to understand the distributional implications of new technologies. In this paper, I analyze the equilibrium bias of technology. I distinguish between the relative bias of technology, which concerns how the marginal product of a factor changes relative to that of another following the introduction of new technology, and the absolute bias, which looks only at the effect of new technology on the marginal product of a factor. The first part of the paper generalizes a number of existing results in the literature regarding the relative bias of technology. In particular, I show that when the menu of technological possibilities only allows for factor-augmenting technologies, the increase in the supply of a factor always induces technological change (or technology adoption) relatively biased towards that factor. This force can be strong enough to make the relative marginal product of a factor increasing in response to an increase in its supply, thus leading to an upward-sloping relative demand curve. However, I also show that the results about relative bias do not generalize when more general menus of technological possibilities are considered. In the second part of the paper, I show that there are much more general results about absolute bias. I prove that under fairly mild assumptions, an increase in the supply of a factor always induces changes in technology that are absolutely biased towards that factor, and these results hold both for small changes and large changes in supplies. Most importantly, I also determine the conditions under which the induced-technology response will be strong enough so that the price (marginal product) of a factor increases in response to an increase in its supply. These conditions correspond to a form of failure of joint concavity of the aggregate production function of the economy in factors and technology. This type of failure of joint concavity is quite possible in economies where equilibrium factor demands and technologies are decided by different agents.
Ordinal Cheap Talk
No full textCan comparative statements be credible even when absolute statements are not? For instance, can a professor credibly rank different students for a prospective employer even if she has an incentive to exaggerate the merits of each student? Or can an analyst credibly rank different stocks even if the client would be dubious about a recommendation to buy any one of them? We examine such problems in a multidimensional sender-receiver game where the sender has private information about multiple variables. We show that ordinal cheap talk, in which the variables are completely ordered by value or grouped into categories by value, can be credible even when interests are too opposed to support communication along any single dimension. Ordinal cheap talk is credible because it reveals both favorable and unfavorable information at the same time, thereby precluding any possibility of exaggeration. The communication gains from ordinal cheap talk can be substantial with only a couple of dimensions, and the payoffs from a complete ordering are asymptotically equivalent to full revelation as the number of variables becomes large. However, in various circumstances the sender can do better through a partial ordering that categorizes variables. Compared to other forms of cheap talk, ordinal cheap talk is exceedingly simple in that the sender only makes straightforward, comparative statements.cheap talk; credibility; communication
Expectational coordination in a class of economic models: Strategic substitutabilities versus strategic complementarities
No full textWe consider an economic model that features: 1. a continuum of agents 2. an aggregate state of the world over which agents have an infinitesimal influence. We first propose a review, based on work by Jara (2007), of the connections between the eductive viewpoint that puts emphasis on Strongly Rational Expectations equilibrium and the standard game-theoretical rationalizability concepts. We explore the scope and limits of this connection depending on whether standard rationalizability versus point-rationalizability, or the local versus the global viewpoint, are concerned. In particular, we define and characterize the set of Point-Rationalizable States and prove its convexity. Also, we clarify the role of the heterogeneity of beliefs in general contexts of expectational coordination (see Evans and Guesnerie, 2005). Then, as in the case of strategic complementarities the study of some best response mapping is a key to the analysis, in the case of unambiguous strategic substitutabilities the study of some second iterate, and of the corresponding two-period cycles, allows to describe the point-rationalizable states. We provide application in microeconomic and macroeconomic contexts.expectational coordination ; rational expectations ; iterative expectational stability ; eductive stability ; strong rationality ; strategic complementarities ; strategic substitutabilities
Ambiguity and Social Interaction
No full textWe present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing)equilibrium prices under Cournot (Bertrand) competition. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.
Uniqueness Conditions for Point-Rationalizable
No full textThe unique point-rationalizable solution of a game is the unique Nash equilibrium. However, this solution has the additional advantage that it can be justified by the epistemic assumption that it is Common Knowledge of the players that only best responses are chosen. Thus, games with a unique point-rationalizable solution allow for a plausible explanation of equilibrium play in one-shot strategic situations, and it is therefore desireable to identify such games. In order to derive sufficient and necessary conditions for unique point-rationalizable solutions this paper adopts and generalizes the contraction-property approach of Moulin (1984) and of Bernheim (1984). Uniqueness results obtained in this paper are derived under fairly general assumptions such as games with arbitrary metrizable strategy sets and are especially useful for complete and bounded, for compact, as well as for finite strategy sets. As a mathematical side result existence of a unique fixed point is proved under conditions that generalize a fixed point theorem due to Edelstein (1962).
