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on History and Philosophy of Economics |
| By: | Alain Bensoussan; Jens Frehse; Phillip Yam |
| Abstract: | In his lectures at College de France, P.L. Lions introduced the concept of Master equation, see [5] for Mean Field Games. It is introduced in a heuristic fashion, from the system of partial differential equations, associated to a Nash equilibrium for a large, but finite, number of players. The method, also explained in[2], consists in a formal analogy of terms. The interest of this equation is that it contains interesting particular cases, which can be studied directly, in particular the system of HJB-FP (Hamilton-Jacobi-Bellman, Fokker-Planck) equations obtained as the limit of the finite Nash equilibrium game, when the trajectories are independent, see [4]. Usually, in mean field theory, one can bypass the large Nash equilibrium, by introducing the concept of representative agent, whose action is influenced by a distribution of similar agents, and obtains directly the system of HJB-FP equations of interest, see for instance [1]. Apparently, there is no such approach for the Master equation. We show here that it is possible. We first do it for the Mean Field type control problem, for which we interpret completely the Master equation. For the Mean Field Games itself, we solve a related problem, and obtain again the Master equation. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1404.4150&r=hpe |
| By: | Schnedler, Wendelin (University of Paderborn); Vanberg, Christoph (Alfred-Weber-Institut für Wirtschaftswissenschaften, Universität Heidelberg) |
| Abstract: | Anecdotal, empirical, and experimental evidence suggests that offering extrinsic rewards for certain activities can reduce people's willingness to engage in those activities voluntarily. We propose a simple rationale for this 'crowding out' phenomenon, using standard economic arguments. The central idea is that the potential to earn rewards in return for an activity may create incentives to play 'hard to get' in an effort to increase those rewards. We discuss two specific contexts in which such incentives arise. In the first, refraining from the activity causes others to attach higher value to it because it becomes scarce. In the second, restraint serves to conceal the actor's intrinsic motivation. In both cases, not engaging in the activity causes others to offer larger rewards. Our theory yields the testable prediction that such effects are likely to occur when a motivated actor enjoys a sufficient degree of 'market power.' |
| Keywords: | intrinsic motivation, crowding out, behavioral economics, market power, hidden information |
| JEL: | D1 M5 D8 D4 C9 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8108&r=hpe |
| By: | Michihiro Kandori (Faculty of Economics, The University of Tokyo); Shinya Obayashi (chool of Arts & Letters, Tohoku University) |
| Abstract: | 　　 Humans are capable of cooperating with one another even when it is costly and a deviation provides an immediate gain. An important reason is that cooperation is reciprocated or rewarded and deviations are penalized in later stages. For cooperation to be sustainable, not only must rewards and penalties be strong enough, but individuals should also have the right incentives to provide rewards and punishments. Codes of conduct with such properties have been studied extensively in game theory (as repeated game equilibria), and the literature on the evolution of cooperation shows how equilibrium behavior might emerge and proliferate in society. We found that community unions, a subclass of labor unions that admits individual affiliations, are ideal to corroborate these theories with reality, because (i) their activities are simple and (ii) they have a structure which closely resembles a theoretical model, the OLG (overlapping generations) repeated game. A detailed case study of a community union revealed a possible equilibrium that can function under the very limited observability in the union. The equilibrium code of conduct appears to be a natural focal point based on simple heuristic reasoning. The union we studied was created out of necessity for cooperation, without knowing or anticipating how cooperation might be sustained. The union has successfully resolved about 3,000 labor disputes and created a number of offspring. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2014cf928&r=hpe |
| By: | Zuazo Gain, Peio |
| Abstract: | In everyday economic interactions, it is not clear whether sequential choices are visible or not to other participants: agents might be deluded about opponents'capacity to acquire,interpret or keep track of data, or might simply unexpectedly forget what they previously observed (but not chose). Following this idea, this paper drops the assumption that the information structure of extensive-form games is commonly known; that is, it introduces uncertainty into players' capacity to observe each others' past choices. Using this approach, our main result provides the following epistemic characterisation: if players (i) are rational,(ii) have strong belief in both opponents' rationality and opponents' capacity to observe others' choices, and (iii) have common belief in both opponents' future rationality and op-ponents' future capacity to observe others' choices, then the backward induction outcome obtains. Consequently, we do not require perfect information, and players observing each others' choices is often irrelevant from a strategic point of view. The analysis extends {from generic games with perfect information to games with not necessarily perfect information{the work by Battigalli and Siniscalchi (2002) and Perea (2014), who provide different sufficient epistemic conditions for the backward induction outcome. |
| Keywords: | perfect information, incomplete information, backward induction, rationality, strong belief, common belief |
| JEL: | C72 D82 D83 |
| Date: | 2014–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:ikerla:12097&r=hpe |
| By: | Beckert, Jens |
| Abstract: | Capitalism is an economic and social order oriented toward the future. In this paper, I describe the unfolding of the temporal order of capitalism and relate it to the restless dynamism of capitalism we have observed since the Industrial Revolution. Since the future is open, actors are confronted with the uncertainty of the outcomes of their decisions. What can expectations be under conditions of uncertainty? To answer this question, I introduce the notion of fictional expectations which can be used to describe decisions made under conditions of an open and uncertain future. In the paper's penultimate section, I apply the concept of fictional expectations to the analysis of four crucial processes of capitalism: money and credit, investments, innovation, and consumption. The main thrust of the paper is that in order to understand economic action in capitalism, actors' perceptions of the future need to take center stage. Not only history matters, but also the future matters. -- Der Kapitalismus als wirtschaftliche und soziale Ordnung orientiert sich an der Zukunft. In diesem Artikel beschreibe ich die Entwicklung der zeitlichen Ordnung des Kapitalismus und setze sie zu dem unaufhaltsamen wirtschaftlichen Wandel seit der industriellen Revolution in Beziehung. Da die Zukunft offen ist, sind Akteure mit der Ungewissheit von Handlungsresultaten konfrontiert. Was sind Erwartungen unter Bedingungen von Ungewissheit? Zur Beantwortung dieser Frage führe ich das Konzept der fiktionalen Erwartungen ein, mit dem sich Entscheidungen unter Bedingungen einer offenen und ungewissen Zukunft beschreiben lassen. Im vorletzten Teil nutze ich das Konzept der fiktionalen Erwartungen zur Untersuchung von vier zentralen Aspekten kapitalistischer Wirtschaft: Geld und Kredit, Investitionen, Innovationen und Konsum. Die wichtigste Überlegung der Ausführungen ist, dass die Analyse wirtschaftlichen Handelns im Kapitalismus die Berücksichtigung der Wahrnehmung der Zukunft verlangt. Nicht nur history matters, sondern die Zukunft ist ebenso wichtig. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:mpifgd:147&r=hpe |
| By: | Charness, Gary (University of California, Santa Barbara); Feri, Francesco (University of Innsbruck); Meléndez-Jiménez, Miguel A. (University of Malaga); Sutter, Matthias (European University Institute) |
| Abstract: | In this paper, we describe a series of laboratory experiments that implement specific examples of a more general network structure and we examine equilibrium selection. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: 1) people seem content with (in the aggregate) capturing only the lion's share of the efficient profits in exchange for reduced exposure to loss, and 2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information. |
| Keywords: | random networks, incomplete information, connectivity, clustering, strategic substitutes, strategic complements, experiment |
| JEL: | C71 C91 D03 D85 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8104&r=hpe |
| By: | Alice Martini; Luca Spataro |
| Date: | 2014–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2014/177&r=hpe |
| By: | Henley, Andrew (Aberystwyth University) |
| Abstract: | This paper provides a quantitative investigation of the strength of the potential relationship between entrepreneurial activity and religious affiliation. The relationship between religion and economic development has attracted recent attention. A positive association may indicate that religion raises the social acceptability of entrepreneurial activity, by inculcating incentives to accumulate wealth and acquire personal responsibility, as well as providing social capital and may be particularly effective where state governance systems are weak. Institutionalist perspectives suggest that religious institutions may support definition of property rights. Economic benefits flow through reduced transactions costs. This paper engages these discussions in order to present a preliminary empirical investigation of the relationships which may exist across national boundaries between religion and entrepreneurship. Definitions of entrepreneurship are taken from the Global Entrepreneurship Monitor (GEM) studies for 2011 and 2012, focusing on the individual rather than on the business venture. Recent data on religious affiliation across countries are used to construct various measures of religious activity and diversity. Preliminary findings suggest, in particular, a significant association between GEM indicators and evangelical-pentecostal-charismatic Christian affiliation. The strength of these associations is offset by state regulation of religion. These findings suggest that attention needs to be paid to the potentially important role that certain forms of religion might play is providing a supportive cultural environment for entrepreneurship. They also suggest that policy-makers may wish to pay closer attention to the potentially supportive role that certain religious organizations might play in new business formation. |
| Keywords: | entrepreneurship, economic development, religion |
| JEL: | L26 M13 O43 Z12 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8111&r=hpe |