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on History and Philosophy of Economics |
| By: | Sandmo, Agnar (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | The paper considers the history of theories of income distribution, from the time of Adam Smith until the 1970s. It is divided into two main parts. Part I considers the positive theory of income distribution, beginning with the classical economists’ analysis of the functional distribution of income between wages, profits and rent. It goes on to present the new theories that emerged with the marginalist revolution and which were based on maximizing behaviour and market equilibrium. The main focus during the early stages of the new developments was on the markets for consumer goods and the role of marginal utility in price determination. The later neoclassical economists, including Alfred Marshall and Knut Wicksell, paid more attention to the special features that characterized the labour market and the role of marginal productivity in wage formation. In the 20th century the neoclassical theory was extended to include analysis of the role of imperfect competition, human capital and risk-taking. Also included in this part of the paper is a discussion of statistical and institutional approaches. Part II covers normative theories of income distribution and their implications for redistributive policy. It begins with a consideration of the value judgements implicit in the policy recommendations of the classical economists and continues with the attempts to establish an analytical foundation for welfare economics. The rise of Paretian welfare theory with its emphasis on the impossibility of interpersonal comparisons of utility made it difficult to draw conclusions regarding income redistribution, but the older utilitarian approach, including equal sacrifice theories, continued to live on in the modern analysis of optimal redistribution. A short Part III contains some concluding reflections on the position of income distribution theory within economics as a whole. |
| Keywords: | Functional and personal income distribution; distributive justice; redistribution policy. |
| JEL: | B10 B20 D30 D63 |
| Date: | 2013–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2013_015&r=hpe |
| By: | Salvadori, Neri; Signorino, Rodolfo |
| Abstract: | The paper proposes a rational reconstruction of the arguments developed by Malthus and Ricardo in their 1815 essays, Grounds of an Opinion and An Essay on Profits, to repudiate and endorse a policy of free corn trade, respectively. Malthus envisaged defence and opulence as two mutually alternative options and, if required to make a choice, he had no doubt in choosing the former. By contrast, Ricardo excluded any alternative between defence and opulence: trade does note give a sustainable weapon to potential enemies of Great Britain whereas trade-driven opulence may give Great Britain greater means to wage a war. |
| Keywords: | Malthus, Ricardo, Corn Laws, Coordination Games |
| JEL: | B12 B31 |
| Date: | 2013–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50534&r=hpe |
| By: | Robert J. Barbera |
| Abstract: | Perhaps the most indictable offense that mainstream economists committed, from 1988 through 2008, was to retrace Keynes's path of discovery from 1924 (A Tract on Monetary Reform) through 1936 (The General Theory). Wholesale deregulation of finance and categorical confidence in a reductionist role for central banks came into being as the conventional wisdom embraced the 1924 view that free markets and stable prices alone give us the best chance for economic stability. In the aftermath of the grand asset market boom-and-bust cycle of 2008-9, we are jettisoning Keynes circa 1924 for the Keynes of 1936. In effect, we study business cycles but seem incapable of extricating the economics profession from reciting its assigned lines as the play unfolds. |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levyop:op_42&r=hpe |
| By: | Zinn, Jesse |
| Abstract: | In this paper I employ Imre Lakatos's methodology of scientific research programs to scrutinize the idea that stagflation in the 1970s falsified the Keynesian research program. I point out that Keynesian models were able to account for stagflation once they included inflation expectations, so the essential tenets of the Keynesian research program are consistent with the would-be anomaly of stagflation. Furthermore, Keynesian economics exhibited both theoretical and empirical progress by evolving in a way that rendered stagflation a logical consequence of Keynesian assumptions. The transition to new classical economics did not yield such progress. Also, as Keynesian economics tends to adopt novel findings and research methods, new classical economics does not have excess theoretical or empirical content relative to the Keynesian research program. In summary, I find that the falsification of the Keynesian program is unwarranted. |
| Keywords: | Keynesian Economics, New Classical Economics, Monetarism, Scientific Revolutions, Scientific Research Programs, Imre Lakatos |
| JEL: | B22 B41 |
| Date: | 2013–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50536&r=hpe |
| By: | Yann Giraud (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); Loïc Charles (LED - Laboratoire d'Economie Dionysien - Université Paris VIII - Vincennes Saint-Denis : EA3391) |
| Abstract: | The rise of visual representation in economics textbooks after WWII is one of the main features of contemporary economics. In this paper, we argue that this development has been preceded by a no less significant rise of visual representation in the larger literature devoted to social and scientific issues, including economic textbooks for non-economists as well as newspapers and magazines. During the interwar era, editors, propagandists and social scientists altogether encouraged the use of visual language as the main vehicle to spread information and opinions about the economy to a larger audience. These new ways of visualizing social facts, which most notably helped shape the understanding of economic issues by various audiences during the years of the Great Depression, were also conceived by their inventors as alternative ways of practicing economics: in opposition to the abstraction of "neoclassical" economics, these authors wanted to use visual representation as a way to emphasize the human character of the discipline and did not accept the strict distinction between the creation and the diffusion of economic knowledge. We explore different yet related aspects of these developments by studying the use of visual language in economics textbooks intended for non-specialists, in periodicals such as the Survey, a monthly magazine intended for an audience of social workers, the Americanization of Otto Neurath's pictorial statistics and finally the use of those visual representations by various state departments and administrations under Roosevelt's legislature (including the much-commented Historical Section of the Farm Security Administration). We show how visualizations that have been created in opposition to neoclassical economics have lost most of their theoretical content when used widely for policy purposes while being simultaneously integrated into the larger American culture. It is our claim that those issues, which are familiar to those involved in cultural and visual studies, are also of crucial importance to apprehend the later developments of modern economics. |
| Date: | 2013–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00870490&r=hpe |
| By: | Yann Giraud (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise) |
| Abstract: | Over the past two decades, numerous contributions to the history of economics have tried to assess Paul Samuelson's political positioning by tracing it in the subsequent editions of his famous textbook Economics. This literature, however, has provided no consensus about the location of Samuelson's political ideas. While some authors believe that Samuelson has always had inclinations toward interventionism, others conclude that he more often acted as a pro-business advocate. The purpose of this paper is not to argue for one of these two interpretations but to depict the making of Economics itself as a political process. By 'political' it is not meant the conduct of party politics but the many political elements that a textbook author has to take into account if he wants to be published and favorably received. I argue that the "middle of the road" stance that Samuelson adopted in the book was consciously constructed by the MIT economist, with the help of his home institution and his publishing company, McGraw-Hill, to ensure both academic freedom and the success of the book. The reason for which the stance developed is related to pre-McCarthyist right-wing criticisms of the textbook and how Samuelson and the MIT department had to endure the pressures from members of the Corporation (MIT's Board of Trustees), who tried to prevent the publication of the textbook and threatened Samuelson's tenure at MIT as soon as 1947 - when early manuscripts were circulated. As a result, it was decided in accordance with both the Corporation and McGraw-Hill that the Readings volume would be published to balance conflicting ideas about state intervention. Following these early criticisms, the making of the subsequent editions relied on a network of instructors and referees all over the US in order to make it as successful and consensual as possible. This seemed to work quite well in the 1950s and for a good portion of the 1960s, until Economics became victim of its own success and was seen, in an ironical twist of fate, as a right wing text by younger, radical economists. From now on, Samuelson will try to have his book sent as often as possible to the radicals for referring process, with mixed results. Eventually, the book became criticized from both its left and its right. |
| Date: | 2013–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00870494&r=hpe |
| By: | Pugno, Maurizio |
| Abstract: | By revisiting Scitovsky's work on well-being, which introduces 'novelty' into the consumer's option set as a peculiar source of satisfaction, this paper finds a number of connections with the recent behavioural economics so as to open new lines on inquiry. First, similarly to behavioural economics, Scitovsky used psychology to interpret sub-optimal choices. However, his welfare benchmark is different from rational choice, as understood by the economists, because 'novelty' implies a very strong form of uncertainty, as well as learning. Second, Scitovsky contributed to further elaboration of the two-systems framework put forward by Kahneman's recent book, which attempts to base behavioural economics on new foundations. Third, Scitovsky anticipated and contributed to specific analytical issues that have been studied in behavioural economics, such as the role of people's skill in uncertainty, the unpredictability of taste changes, and harmful addiction. -- |
| Keywords: | Scitovsky,behavioural economics,novelty,consumption skill,strong uncertainty,harmful addiction |
| JEL: | B31 D03 D11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201354&r=hpe |
| By: | Cavalieri, Duccio |
| Abstract: | This essay provides a critical Marxist reformulation, internal to the cultural tradition of Western Marxism, of Marx’s theoretical treatment of value and capital. It implies the abandonment of the ‘pure’ labour theory of value of the young Marx in favour of a ‘mixed’ labour-and capital theory of value reflecting the different theoretical perspective shown by the mature Marx, after his epistemological break described by Althusser. The accounting practice of defining and measuring income and capital is criticized, for its disregard of the financial cost of invested capital. Foley’s ‘New Interpretation’ of Marx’s theoretical system and its main variants are refused for their acritical endorsement of Marx’s assumption of a ‘new-value equality’ between the net product of the economy and the living labour employed in the production of gross output. A different method for converting quantities of labour-time in terms of money, which accounts for explicit and implicit costs, is proposed. |
| Keywords: | value; labour; capital; money; income; capital theory; Marx; critical Marxism; scientific Marxism; surplus approach; net value equality; new interpretation; single-system interpretations; MEV; MELT. |
| JEL: | B12 B22 B51 D24 D4 D46 E11 E22 E41 G00 G31 |
| Date: | 2013–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50527&r=hpe |
| By: | Ho Fai Chan; Bruno S. Frey; Jana Gallus; Markus Schaffner; Benno Torgler; Stephen Whyte |
| Abstract: | External prominence (measured by the number of pages indexed on search engines or TED talk invitations) can be capitalized on the speakers' market while research performance (measured by publication and citation indicators) cannot. There is thus a clear distinction between the capitalization of external and internal prominence. Success through authorship of books is also positively correlated with speaking fees, however once we control for external prominence the statistical significance disappears. We find that academics profit from having been awarded a major book prize. |
| Keywords: | Academic Performance, Scholarly Importance, Market for Economists, Social Importance of Economists, External and Internal Influence, Book Prizes, TED Talks |
| JEL: | A11 A13 Z18 Z19 |
| Date: | 2013–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:wp021&r=hpe |
| By: | Timothy C. Johnson |
| Abstract: | This paper argues that the fundamental principle of contemporary financial economics is balanced reciprocity, not the principle of utility maximisation that is important in economics more generally. The argument is developed by analysing the mathematical Fundamental Theory of Asset Pricing with reference to the emergence of mathematical probability in the seventeenth century in the context of the ethical assessment of commercial contracts. This analysis is undertaken within a framework of Pragmatic philosophy and Virtue Ethics. The purpose of the paper is to mitigate future financial crises by reorienting financial economics to emphasise the objectives of market stability and social cohesion rather than individual utility maximisation. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1310.2798&r=hpe |
| By: | Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M. (GSBE) |
| Abstract: | We consider effectivity functions for finitely many players and alternatives. We assume that players have incomplete information with respect to the preferences of the other players. Our main result is the characterization of effectivity functions which have an ex post Nash consistent representation, i.e., there is a game form such that i the distribution of power among coalitions of players is the same as in the effectivity function and ii there is an ex post Nash equilibrium in pure strategiesfor any preference profile. |
| Keywords: | Existence and Stability Conditions of Equilibrium; Game Theory and Bargaining Theory: General; Asymmetric and Private Information; Mechanism Design; |
| JEL: | C62 C70 D82 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umagsb:2013049&r=hpe |
| By: | Rohan Dutta; Ryosuke Ishii |
| Abstract: | An important form of commitment is the ability to restrict the set of future actions from which choices can be made. We study a simple dynamic game of complete information which incorporates this type of commitment. For a given initial game, the players engage in an endogenously determined number of commitment periods before choosing from the remaining actions. We show the existence of equilibria with pure strategies in the commitment periods. For important classes of games, including pure coordination games and the staghunt game the equilibrium outcome is unique and efficient. This is despite the synchronous move structure. Moreover, efficient coordination does not necessarily involve commitments on the equilibrium path: the option alone is sufficient. |
| Keywords: | Dynamic Commitment, Endogenous Timing, Coordination Games, Uniqueness, Payoff Dominance, Stag Hunt |
| JEL: | C72 C73 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:10-2013&r=hpe |
| By: | Robert William, Vivian |
| Abstract: | Nicolas Bernoulli suggested the St Petersburg game, nearly 300 years ago, which is widely believed to produce a paradox in decision theory. This belief stems from a long standing mathematical error in the original calculation of the expected value of the game. This article argues that, in addition to the mathematical error, there are also methodological considerations which gave rise to the paradox. This article explains these considerations and why because of the modern computer, the same considerations, when correctly applied, also demonstrate that no paradox exists. Because of the longstanding belief that a paradox exists it is unlikely the mere mathematical correction will end the myth. The article explains why it is the methodological correction which will dispel the myth. |
| Keywords: | Central Limit Theorem, deductive logic, inductive logic, Law of Large Numbers, simulation of games; economic paradoxes; St Petersburg game; St Petersburg Paradox |
| JEL: | C44 C9 D81 N00 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50515&r=hpe |
| By: | Joanna Shepherd; Paul H. Rubin |
| Abstract: | This Chapter summarizes the literature on the economic analysis of the criminal law. First, it discusses the positive theory of criminal behavior and reviews the empirical evidence in support of the theory. Then, it discusses the normative theory of how public law enforcement should be designed to minimize the social costs of crime. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:emo:wp2003:1304&r=hpe |
| By: | Eric Hoffmann (Department of Economics, The University of Kansas) |
| Abstract: | Global games methods are aimed at resolving issues of multiplicity of equilibria and coordination failure that arise in game theoretic models by relaxing common knowledge assumptions about an underlying parameter. These methods have recently received a lot of attention when the underlying complete information game is one of strategic complements (GSC). Little has been done in this direction concerning games of strategic substitutes (GSS), however. This paper complements the existing literature in both cases by extending the global games method developed by Carlsson and Van Damme (1993) to N-player, multi-action GSS and GSC, using a p-dominance condition as the selection criterion. Moreover, this approach is much less restrictive on the conditions that payo_s and the underlying parameter space must satisfy, and therefore serves to cirumvent recent criticisms to global games methods. The second part of this paper generalizes the model by allowing _groups_ of players to receive homogenous signals, which, under certain conditions, strengthens the model's power of predictability. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201308&r=hpe |
| By: | Nayak, Purusottam |
| Abstract: | The present paper is a review of methodological advancements in human development literature starting from 1990 till date. While highlighting the contribution of UNDP to the concept of human development and construction of HDI it mentions that the introduced concept and method of measurement is a huge qualitative improvement over the earlier concept of growth and per capita GDP measurement. Although the human development report started with a poor methodology, thanks to the galaxy of scholars for their untiring efforts and invaluable contributions in the successive years that enabled UNDP in refining its methodology to a large extent. There is no denying fact that there is no end to refinements, the purpose for which Mahbub ul Haq struggled in his entire life has been served. |
| Keywords: | Human Development, Human Development Index, Methodological change |
| JEL: | O1 |
| Date: | 2013–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50608&r=hpe |
| By: | Ke, Changxia |
| Abstract: | Alliances often face both free-riding and hold-up problems, which under- mine the effectiveness of alliances in mobilizing joint fighting effort. Despite of these disadvantages, alliances are still ubiquitous in all types of contests. This paper asks if there are non-monetary incentives to form alliances, e.g., intimidating/discouraging the single player(s) who is/are left alone. For this purpose, I compare symmetric (2 vs. 2) and asymmetric (2 vs. 1) contests to their equivalent 4-player and 3-player individual contests, respectively. We find that alliance players in symmetric (2 vs. 2) contests behave the same as those in equivalent 4-player individual contests. However, in asymmetric (2 vs. 1) contests, stand-alone players were strongly discouraged to exert effort (especially the females), compared to the 3-player individual contests. Alliance players may have anticipated this effect and also reduced their effort, if alliances share the prize according to the merit rule. Behavioural factors such as the need to belong can help reconcile the "paradox of alliance formation". |
| Keywords: | Alliance Formation; Contest and Conflict; Experiment |
| JEL: | D72 D74 C91 |
| Date: | 2013–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:421&r=hpe |
| By: | Frey, Bruno S.; Gallus, Jana |
| Abstract: | Much recent research in economics focuses on exploring behavioral anomalies, i.e., systematic deviations from the assumptions of the rationally self-interested model of man. Laboratory studies are used to identify seeming inconsistencies with micro-economic theory on the level of individuals. Since economics is a social science, this article proposes that the next crucial step consists in shifting the focus to the macro-level. It examines the process through which behavioral anomalies are aggregated to a societal outcome. Since individuals are reactive when they interact with others and face institutional constraints, the aggregation process may lead to different outcomes than what has been observed in individual-level studies: the respective anomalies may disappear, or they may become stronger on the macro-level. The discussion demonstrates that there are a great number of aspects to be analyzed. The paper presents fragments of what could become a more extensive field of research. -- |
| Keywords: | economics and psychology,behavioral economics,behavioral anomalies,reactivity |
| JEL: | A10 B00 D70 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201351&r=hpe |
| By: | Le Garrec, Gilles |
| Abstract: | In mainstream economics individuals are supposed to be driven only by their self-interest. By contrast, surveys clearly show that people do care about fairness in their demand for redistribution. In this article, in the spirit of the new synthesis in moral psychology (Haidt, 2007: The new synthesis in moral psychology) the author proposes to modelize the voting behavior over redistribution as the interaction between (a) an automatic cognitive process which quickly generates intuitions on the fair level of redistribution, (b) a rational self-oriented reasoning which controls the feeling of guilt associated with fair intuitions. In addition, considering that guilt aversion depends on the cultural context, the author shows that the model exhibits a multiplicity of history-dependent steady states which may account for the huge difference of redistribution observed between Europe and the United States. -- |
| Keywords: | redistribution,voting behavior,fairness,behavioral economics |
| JEL: | D03 D64 D72 H53 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201353&r=hpe |
| By: | Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M. (GSBE) |
| Abstract: | This paper considers the estate division problem from a non-cooperative perspective. The integer claim game initiated by ONeill 1982 and extended by Atlamaz et al. 2011 is generalized by considering different sharing rules to divide every interval among the claimants. For problems with an estate larger than half of the total entitlements, we show that every sharing rule satisfying four fairly general axioms yields the same set of Nash equilibrium profiles and corresponding payoffs. Every rule that always results in such equilibrium payoff vector is characterized by the properties minimal rights first and lower bound of degree half. Well-known examples are the Talmud rule, the adjusted proportional rule and the random arrival rule. Then our focus turns to more specific claim games, i.e. games that use the constrained equal awards rule, the Talmud rule, or the constrained equal losses rule as a sharing rule. Also a variation on the claim game is considered by allowing for arbitrary instead of integer claims. |
| Keywords: | Noncooperative Games; Conflict; Conflict Resolution; Alliances; |
| JEL: | C72 D74 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umagsb:2013055&r=hpe |
| By: | Boschini, Anne (Dept. of Economics, Stockholm University); Muren, Astri (Dept. of Economics, Stockholm University); Persson, Mats (Institute for International Economic Studies, Stockholm University) |
| Abstract: | People cooperate more in one-shot interactions than can be explained by standard textbook preferences. We discuss a set of non-standard preferences that can accommodate such behavior. They are social, in the sense of incorporating the payoffs of other persons; they are also norm-based, in the sense of taking into account the behavior of other persons. We show theoretically that, with such preferences, a Nash equilibrium with a strictly positive cooperation rate can exist. We use experimental data on within-subject decisions to show that such preferences are empirically plausible. The data show that, in addition to the well-known types (egoist, altruist, reciprocator), there is an important group: the social egoist. Such individuals care for people who have cooperated, but ignore people who have broken the implicit cooperation norm in society. The social egoists, who turn out to be different from “conditional cooperators”, account for one third of the observations in our experiment. |
| Keywords: | social norms; prisoner’s dilemma; hawk-dove game; egoism; altruism; reciprocity; conditional cooperation |
| JEL: | C91 D03 D64 |
| Date: | 2013–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2013_0014&r=hpe |
| By: | Roy, Devjani (Harvard University); Zeckhauser, Richard (Harvard University) |
| Abstract: | Traditional decision theory distinguishes between risk and uncertainty. With risk, the probabilities of possible outcomes are known; with uncertainty, those outcomes are known, but not their probabilities. We introduce the concept of ignorance, a third, less tractable category. With ignorance, even the possible outcomes cannot be identified. Ignorance takes importance when high payoffs are associated with the unidentified outcomes. Thus we focus on consequential amazing developments, or CADs. CADs spring upon societies as well as individuals. In the policy realm, the 2008 financial meltdown and the Arab Spring would represent CADs, major unanticipated events. For an individual, a CAD might be the discovery that a faithful spouse of many years has a secret second family, or that our trusted business partner has been pilfering corporate secrets all along. Authors depict the implications of consequential ignorance in some of the greatest of literary works: Hamlet's ignorance of his father's killer, Macbeth's unawareness of outcomes when he attempts to seize the Scottish crown, Odysseus's journey back to Ithaca involving a series of consequential adventures, all unknowable. Consequential ignorance cannot be studied in a controlled laboratory setting, since its payoffs are high, its time delays often long, and merely introducing the subject tends to give away the game. Thus we study ignorance through great works of literature, from antiquity to the present day, positing that great writers understand how humans make decisions. We distinguish between unrecognized and recognized ignorance. In the latter category, we identify specific cognitive biases at work. We provide a formula for calculating consequential ignorance that incorporates the expected magnitudes and assessed base rates for CADs. Finally, we propose steps towards measured decision making under ignorance. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp13-039&r=hpe |
| By: | Olivier Bochet; Jeremy Laurent-Lucchetti; Justin Leroux; Bernard Sinclair-Desgagné |
| Abstract: | It is commonly found that uncertainty helps discipline economic agents in strategic contexts. Using a stochastic variant of the Nash Demand Game, we show that the presence of uncertainty may have a dramatically opposite effect. Cautious (efficient) and dangerous (inefficient) equilibria may co-exist regardless of agents’ risk preferences. We report experimental evidence on these predictions. We find that a risk-taking society may emerge from the decentralized actions of risk-averse individuals. Subjects predominantly play symmetric dangerous equilibria, even when all agents are risk averse. An important driver for this result is the pessimistic beliefs of subjects regarding others’ claims. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:gen:geneem:13101&r=hpe |
| By: | Theodoros M. Diasakos (University of St Andrews); Kostas Koufopoulos |
| Abstract: | This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz (QJE, 1976). We propose a simple extension of the game-theoretic structure in Hellwig (EER, 1987) under which Nash-type strategic interaction between the informed customers and the uninformed firms results always in a particular separating equilibrium. The equilibrium allocation is unique and Pareto-efficient in the interim sense subject to incentive-compatibility and individual rationality. In fact, it is the unique neutral optimum in the sense of Myerson (ECMA, 1983). |
| Keywords: | Insurance Market, Adverse Selection, Incentive Efficiency |
| JEL: | D86 |
| URL: | http://d.repec.org/n?u=RePEc:san:wpecon:1313&r=hpe |
| By: | Singh, Ajay Kumar; Vasudeva, Sakshi |
| Abstract: | Accounting scandals have shaken the confidence of the investor in the companies. Large number of people lost their money in these scandals. All these scandals were attributed to false, misleading, or untruthful accounting. This undermines the role of accounting professionals who did not report material manipulations in the financial results of the company. The study attempted to find an association between ethical values of accounting professionals and their choices in ethical dilemmas in their profession. Correlation scores in this study revealed that there is a statistically significant low degree of positive correlation between value assessment ratings and ethical dilemmas in scenarios. Similarly, the correlation coefficients computed between scenario ratings and formal ethics education indicates that the latter would be important in preventing the instances of unethical reporting. Ethical value score of professionals were found to be more explanatory than formal ethical education. The study strongly recommends building up of rigorous ethical and fiduciary responsibility in the financial sector through various means. The auditors must be trained to become responsible, independent, and judicious while conducting audits. Professional bodies should encourage compliance with ethical reporting practices in accounting by both carrot and stick approach. |
| Keywords: | Ethics, Values, Accounting professionals,unethical reporting, |
| JEL: | M41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:40109&r=hpe |