nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒04‒04
two papers chosen by
Stan Miles
Thompson Rivers University

  1. Strategic Voting under Proportional Representation and Coalition Governments: A Simulation and Laboratory Experiment By Meffert, Michael F.; Gschwend, Thomas
  2. The Virtues and Vices of Equilibrium and the Future of Financial Economics By J. Doyne Farmer; John Geanakoplos

  1. By: Meffert, Michael F. (Sonderforschungsbereich 504); Gschwend, Thomas (Sonderforschungsbereich 504)
    Abstract: The theory of strategic voting has been tested in experiments for elections in single member districts with three candidates or parties. It is unclear whether it can explain strategic voting behavior in a fairly common type of political system, multi-party systems with proportional representation, minimum vote thresholds, and coalition governments. In this paper, we develop a (non-formal) strategic voting game and show in a simulation that the model produces election scenarios and outcomes with desirable characteristics. We then test the decision-theoretic model in a laboratory experiment. Participants with a purely instrumental (financial) motivation voted in a series of 25 independent elections. The availability of polls and coalition signals by parties was manipulated. The results show that voters are frequently able to make optimal or strategic vote decisions, but that voters also rely on simple decision heuristics and are highly susceptible to coalition signals by parties.
    Date: 2007–07–30
    URL: http://d.repec.org/n?u=RePEc:xrs:sfbmaa:07-55&r=cmp
  2. By: J. Doyne Farmer (Sante Fe Institute); John Geanakoplos (Cowles Foundation, Yale University)
    Abstract: The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then we present a critique and describe why this approach is inherently limited, and why economics needs to move in new directions if it is to continue to make progress. We stress that this shouldn’t be a question of dogma, but should be resolved empirically. There are situations where equilibrium models provide useful predictions and there are situations where they can never provide useful predictions. There are also many situations where the jury is still out, i.e., where so far they fail to provide a good description of the world, but where proper extensions might change this. Our goal is to convince the skeptics that equilibrium models can be useful, but also to make traditional economists more aware of the limitations of equilibrium models. We sketch some alternative approaches and discuss why they should play an important role in future research in economics.
    Keywords: Equilibrium, Rational expectations, Efficiency, Arbitrage, Bounded rationality, Power laws, Disequilibrium, Zero intelligence, Market ecology, Agent based modeling
    JEL: A10 A12 B0 B40 B50 C69 C9 D5 D1 G1 G10 G11 G12 G13 G14
    Date: 2008–03
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1647&r=cmp

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