nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒07‒14
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. A Unified Approach to Equilibrium Existence in Discontinuous Strategic Games. By Philippe Bich; Rida Laraki
  2. Analogies and Theories: The Role of Simplicity and the Emergence of Norms By Gabrielle Gayer; Itzhak Gilboa
  3. Econometric methods and Reichenbach's principle By Sean Muller
  4. Déni du travail et tyrannie des normes-Denial of work and tyranny of norms By Damien Collard
  5. Policy Responses to Changing Perceptions of the Role of Agriculture in Development By Kym Anderson
  6. A theory of search with deadlines and uncertain recall By S. Nuray Akin; Brennan Platt
  7. Contest Functions: Theoretical Foundations and Issues in Estimation By Hao Jia; Stergios Skaperdas; Samarth Vaidya
  8. Sharpening the Effectiveness of Natural Experiments as an Analytical Tool By Duleep, Harriet
  9. La conférence sur le développement soutenable de Rio+20 : un contexte inédit By Michel Damian; Franck-Dominique Vivien
  10. A hidden Markov model for the detection of pure and mixed strategy play in games By Shachat, Jason; Swarthout, J. Todd; Wei, Lijia
  11. The penalty - kick game under incomplete información. By Germán Coloma
  12. Popular Despotism: An Economist's Explanation By William Coleman
  13. Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments By Philip Hans Franses; Michael McAleer; Rianne Legerstee

  1. By: Philippe Bich (Centre d'Economie de la Sorbonne - Paris School of Economics); Rida Laraki (Ecole Polytechnique - Economics Department et IMJ - Equipe Combinatoire et Optimisation)
    Abstract: Several relaxations of Nash equilibrium are shown to exist in strategic games with discontinuous payoff functions. Those relaxations are used to extend and unify several recent results and link Reny's better-reply security condition [Reny, P.J. (1999). On the existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games] to Simon-Zame's endogenous tie-breaking rules [Simon, L.K. and Zame, W.R. (1990). Discontinuous Games and Endogenous Sharing Rules].
    Keywords: Discontinuous games, Nash equilibrium, Reny equilibrium, better-reply security, endogenous sharing rule, quasi equilibrium, finite deviation equilibrium, symmetric games.
    JEL: C02 C62 C72
    Date: 2012–06
  2. By: Gabrielle Gayer (Department of Economics [Israël] - Bar-Ilan University); Itzhak Gilboa (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959, Tel-Aviv University - Tel-Aviv University)
    Abstract: We consider the dynamics of reasoning by general rules (theories) and specific cases (analogies). When an agent faces an exogenous process, we show that, under mild conditions, if reality happens to be simple, the agent will converge to adopt a theory and discard analogical thinking. If, however, reality is complex, the agent may rely on analogies more than on theories. By contrast, when the process is generated by agents' predictions, convergence to a theory is much more likely, as in the emergence of norms in a coordination game. Mixed cases, involving noisy endogenous processes are likely to give rise to complex dynamics of reasoning, switching between theories and analogies.
    Keywords: analogies, theories, simplicity, norms
    Date: 2012–06–28
  3. By: Sean Muller (SALDRU, School of Economics, University of Cape Town)
    Abstract: Reichenbach's 'principle of the common cause' is a foundational assumption of some important recent contributions to quantitative social science methodology but no similar principle appears in econometrics. Reiss (2005) has argued that the principle is necessary for instrumental variables methods in econometrics, and Pearl (2009) builds a framework using it that he proposes as a means of resolving an important methodological dispute among econometricians. We aim to show, through analysis of the main problem instrumental variables methods are used to resolve, that the relationship of the principle to econometric methods is more nuanced than implied by previous work, but nevertheless may make a valuable contribution to the coherence and validity of existing methods.
    Keywords: Reichenbach's principle, econometrics, causality
    Date: 2012
  4. By: Damien Collard (Université de Franche-Comté)
    Abstract: (VF)L’objet de cet article est d’explorer, dans une perspective clinique, les mécanismes organisationnels qui favorisent le déni du travail, à partir de l’exemple de deux démarches qualité qui ont été déployées à la SNCF dans le domaine de la relation de service. Les normes de service qui ont été définies dans le cadre de ces deux démarches ont contribué au déni du travail des agents en front office de la SNCF, essentiellement parce que le respect de ces normes est devenue une fin en soi. Cette situation a fait naître une activité « contrariée » (CLOT, 1999) chez les agents en front office, dans la mesure où ces normes ont été perçues comme une entrave à la réalisation d’un travail de qualité. Dans les deux cas étudiés, le déni a porté simultanément sur : - la réalité (dans laquelle le travail de ces agents devait s’exercer), - le travail réel (par opposition au travail prescrit), - et le « réel du travail » (au sens où l’entend la psychodynamique du travail).(VA)Based on the example of two quality processes deployed at the SNCF in the field of the service encounter, the aim of this article is to explore, from a clinical point of view, organizational mechanisms which encourage the denial of work. The norms of services previously defined contributed to the front office agents’ denial of work, essentially because the respect of these norms became an ultimate finality. This situation has induced an “annoyed activity” (CLOT, 2009) among the front office agents, owing to the fact that the norms have been perceived as a hindrance to the accomplishment of a high-grade work. In the two previous practical examples, the reality (of work), the real work (in opposition to the prescribed work) and the “real of work” (in the meaning of the psychodynamics of work) have been denied.
    Keywords: déni du travail;"réel du travail";normes de service;relation de service;denial of work;“real of work”;norms of services;service encounter.
    JEL: M12 M14
    Date: 2012–06
  5. By: Kym Anderson
    Abstract: Traditionally, development economists had a dim view of the contribution that farmers made to modern economic growth, compared with manufacturers. Hence agricultural exports and manufacturing imports were often taxed. This view changed over time though, as first economists and then policy makers came to understand the high cost of an anti-agricultural, import-substituting industrialization strategy. This paper outlines how this change came about and the resulting economic policy reforms that occurred in developing countries from the 1980s. It then considers the kinds of distortions that remain within agricultural markets, their cost to the global economy, and alternatives to these price-distorting measures.
    Keywords: agricultural development economics, import-substituting industrialization, farm and food price distortions
    Date: 2012
  6. By: S. Nuray Akin (Department of Economics, University of Miami); Brennan Platt (Department of Economics, Brigham Young University)
    Abstract: We analyze an equilibrium search model where buyers seek to purchase a good before a deadline and face uncertainty regarding the availability of past price quotes in the future. Sellers cannot observe a potential buyer's remaining time until deadline nor his quote history, and hence post prices that weigh the probability of sale versus the profit once sold. The model's equilibrium can take one of three forms. In a late equilibrium, buyers initially forgo purchases, preferring to wait until the deadline. In an early equilibrium, any equilibrium offer is accepted as soon as it is received. In a full equilibrium, higher prices are turned down until near the deadline, while lower prices are immediately accepted. Equilibrium price and sales dynamics are determined by the time remaining until the deadline and the quote history of the consumer.
    Keywords: Equilibrium Search; Deadlines; Uncertain Recall; Price Posting; Reservation Prices
    JEL: D40 D83
    Date: 2012–01–12
  7. By: Hao Jia (School of Accounting, Economics and Finance, Deakin University); Stergios Skaperdas (Department of Economics, University of California-Irvine); Samarth Vaidya (School of Accounting, Economics and Finance, Deakin University University)
    Abstract: Contest functions (alternatively, contest success functions) determine probabilities of winning and losing as a function of contestants’ eort. They are used widely in many areas of economics that employ contest games, from tournaments and rent-seeking to conflict and sports. We first examine the theoretical foundations of contest functions and classify them into four types of derivation: stochastic, axiomatic, optimally-derived, and microfounded. The additive form (which includes the ratio or “Tullock†functional form) can be derived in all four dierent ways. We also explore issues in the econometric estimation of contest functions, including concerns with data, endogeneity, and model comparison.
    Keywords: Rent-seeking; Conflict; Tournaments; Litigation; Advertising
    JEL: C11 C72 D72 D74 L41 L23 M37 M52
    Date: 2012–02
  8. By: Duleep, Harriet (College of William and Mary)
    Abstract: The importance of using natural experiments in economic research has long been recognized. Yet, it is only in recent years that natural experiments have become an integral part of the economist's analytical toolbox, thanks to the efforts of Meyer, Card, Peters, Krueger, Gruber, and others. This use promises to shed new light on a variety of public policy issues and has already caused a major challenge to some tightly held beliefs in economics, most vividly illustrated by the finding of a positive effect of a minimum wage increase on the employment of low-wage workers. Although currently in vogue in economic research, the analysis of natural experiments could be substantially strengthened. This paper discusses several methodological approaches that would increase the precision and reliability of the results stemming from the analysis of natural experiments. A theme underlying all of these proposals is how best to measure the effect of a treatment on a variable, as opposed to explaining a level or change in a variable.
    Keywords: natural experiments, regression format, treatment effect, precision, extraneous group-specific effects, minimum wage, divorce laws, military service, Julian Simon
    JEL: J08 J18 J38 J48
    Date: 2012–06
  9. By: Michel Damian (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II); Franck-Dominique Vivien (regards - Laboratoire des Sciences Economiques de Reims - Université de Reims - Champagne Ardenne)
    Abstract: La Conférence de Rio+20 sur le développement soutenable s'est tenue du 20 au 22 juin 2012 au Brésil, dans un contexte économique inédit. Jamais jusqu'à présent une conférence sur l'environnement et le développement n'a été tenue en période de récession économique au Nord et de basculement de la planète en direction du Sud et de l'Asie, avec des transformations de grande ampleur qui pourraient bien perdurer jusqu'à un éventuel Rio+30 ou +40
    Keywords: développement durable ; gouvernance internationale
    Date: 2012–06
  10. By: Shachat, Jason; Swarthout, J. Todd; Wei, Lijia
    Abstract: We propose a statistical model to assess whether individuals strategically use mixed strategies in repeated games. We formulate a hidden Markov model in which the latent state space contains both pure and mixed strategies, and allows switching between these states. We apply the model to data from an experiment in which human subjects repeatedly play a normal form game against a computer that always follows its part of the unique mixed strategy Nash equilibrium profile. Estimated results show significant mixed strategy play and non-stationary dynamics. We also explore the ability of the model to forecast action choice.
    Keywords: Mixed Strategy; Experiment; Hidden Markov Model
    JEL: C92 C72 C11
    Date: 2012–07–07
  11. By: Germán Coloma
    Abstract: This paper presents a model of the penalty-kick game between a soccer goalkeeper and a kicker, in which there is uncertainty about the kicker’s type (and there are two possible types of kicker). To find a solution for this game we use the concept of Bayesian equilibrium, and we find that, typically, one of the kicker’s types will play a mixed strategy while the other type will choose a pure strategy (or, sometimes, a “restricted mixed strategy”). The model has a simpler version in which the players can only choose between two strategies (right and left), and a more complex version in which they can also choose a third strategy (the center of the goal). Comparing the incomplete-information Bayesian equilibria with the corresponding complete-information Nash equilibria, we find that in all cases the expected scoring probability increases (so that, on average, the goalkeeper is worse off under incomplete information). The three-strategy model is also useful to explain why it could be optimal for a goal keeper never to choose the center of the goal (although at the same time there were some kickers who always chose to shoot to the center).
    Keywords: soccer penalty kicks, mixed strategies, Bayesian equilibrium, incomplete information
    JEL: C72 L83
    Date: 2012–05
  12. By: William Coleman
    Abstract: The paper addresses one of the disappointments that the liberal has faced intermittently over the past two hundred years: the apparent lack of relish by the public at large for democracy.
    Date: 2012–06
  13. By: Philip Hans Franses; Michael McAleer (University of Canterbury); Rianne Legerstee
    Abstract: Macroeconomic forecasts are frequently produced, widely published, inten¬sively discussed and comprehensively used. The formal evaluation of such forecasts has a long research history. Recently, a new angle to the evaluation of forecasts has been addressed, and in this review we analyse some recent developments from that perspective. The literature on forecast evaluation predominantly assumes that macro¬economic forecasts are generated from econometric models. In practice, however, most macroeconomic forecasts, such as those from the IMF, World Bank, OECD, Federal Reserve Board, Federal Open Market Committee (FOMC) and the ECB, are typically based on econometric model forecasts jointly with human intuition. This seemingly inevitable combination renders most of these forecasts biased and, as such, their evaluation becomes non-standard. In this review, we consider the evaluation of two forecasts in which: (i) the two forecasts are generated from two distinct econo¬metric models; (ii) one forecast is generated from an econometric model and the other is obtained as a combination of a model and intuition; and (iii) the two forecasts are generated from two distinct (but unknown) combinations of different models and intu¬ition. It is shown that alternative tools are needed to compare and evaluate the fore-casts in each of these three situations. These alternative techniques are illustrated by comparing the forecasts from the (econometric) Staff of the Federal Reserve Board and the FOMC on inflation, unemployment and real GDP growth. It is shown that the FOMC does not forecast significantly better than the Staff, and that the intuition of the FOMC does not add significantly in forecasting the actual values of the economic fundamentals. This would seem to belie the purported expertise of the FOMC.
    Keywords: Macroeconomic forecasts; econometric models; human intuition; biased forecasts; forecast performance; forecast evaluation; forecast comparison
    JEL: C22 C51 C52 C53 E27 E37
    Date: 2012–06–08

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