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on History and Philosophy of Economics |
| By: | Turner, John D. |
| Abstract: | This essay looks at the bidirectional relationship between financial history and financial economics. It begins by giving a brief history of financial economics by outlining the main topics of interest to financial economists. It then documents and explains the increasing influence of financial economics upon financial history, and warns of the dangers of applying financial economics unthinkingly to the study of financial history. The essay proceeds to highlight the many insights that financial history can potentially provide to financial economics. The main conclusion of the essay is that financial economics can potentially learn more from financial history than vice versa. -- |
| Keywords: | financial economics,financial history,asset pricing,agency,corporate finance,behavioural finance,options |
| JEL: | G00 N01 N20 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:1403&r=hpe |
| By: | Elise S. Brezis (Bar-Ilan University); Thierry Verdier |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2014-04&r=hpe |
| By: | Jason Shachat; J. Todd Swarthout |
| Abstract: | We conduct an experiment in which we auction the scarce rights to play the Proposer and Responder positions in subsequent ultimatum games. As a control treatment, we randomly allocate these rights and then charge exogenous participation fees according to the auction price sequences observed in the auction treatment. With endogenous selection into ultimatum games via auctions, we find that play converges to a session-specific Nash equilibrium and auction prices emerge which support this equilibrium by the principle of forward induction. With random assignment and exogenous participation fees, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. The Nash equilibrium observed within a session results in low ultimatum game offers, but the subgame perfect Nash equilibrium is never observed. |
| Keywords: | Ultimatum Bargaining; Auction; Forward Induction |
| JEL: | C92 C78 D44 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002056&r=hpe |
| By: | Mitri Kitti (Department of Economics, University of Turku) |
| Abstract: | This paper considers policies and payoffs corresponding to subgame perfect equilibrium strategies in discounted stochastic games with finitely many states. It is shown that a policy is induced by an equilibrium strategy if and only if it can be supported with the threat of reverting to the induced policy that gives the least equilibrium payoff for the deviator. It follows that the correspondence of subgame perfect equilibrium payoffs is the largest fixed-point of a correspondence-valued operator defined by the players’ incentive compatibility conditions. Moreover, the fixed-point iteration converges to the equilibrium payoff correspondence. |
| Keywords: | Subgame Perfect Equilibria in Discounted Stochastic Games |
| JEL: | C73 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp87&r=hpe |
| By: | Jason Shachat; J. Todd Swarthout |
| Abstract: | We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is. |
| Keywords: | ultimatum bargaining; auction; forward induction; loss avoidance |
| URL: | http://d.repec.org/n?u=RePEc:wyi:journl:002215&r=hpe |
| By: | Jason Shachat; J. Todd Swarthouty; Lijia Wei |
| Abstract: | We examine experimentally how humans behave when they play against a computer which implements its part of a mixed strategy Nash equilibrium. We consider two games, one zero-sum and another unprofitable with a pure minimax strategy. A minority of subjects' play was consistent with their Nash equilibrium strategy, while a larger percentage of subjects' play was more consistent with different models of play: equiprobable play for the zero-sum game, and the minimax strategy in the unprofitable game. We estimate the heterogeneity and dynamics of the subjects' latent mixed strategy sequences via a hidden Markov model. This provides clear results on the identification of the use of pure and mixed strategies and the limiting distribution over strategies. The mixed strategy Nash equilibrium is not self-enforcing except when it coincides with the equal probability mixed strategy, and there is surprising amounts of pure strategy play and clear cycling between the pure strategy states. |
| Keywords: | Mixed Strategy, Nash Equilibrium, Experiment, Hidden Markov Model |
| JEL: | C92 C72 C10 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002021&r=hpe |
| By: | Gaëtan Fournier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne); Marco Scarsini (Engineering and System Design Pillar - Singapore University of Technology and Design) |
| Abstract: | We consider a Hotelling game where a finite number of retailers choose a location, given that their potential customers are distributed on a network. Retailers do not compete on price but only on location, therefore each consumer shops at the closest store. We show that when the number of retailers is large enough, the game admits a pure Nash equilibrium and we construct it. We then compare the equilibrium cost bore by the consumers with the cost that could be achieved if the retailers followed the dictate of a benevolent planner. We perform this comparison in term of the induced price of anarchy, i.e., the ratio of the worst equilibrium cost and the optimal cost, and the induced price of stability, i.e., the ratio of the best equilibrium cost and the optimal cost. We show that, asymptotically in the number of retailers, these ratios are two and one, respectively. |
| Keywords: | Induced price of anarchy; induced price of stability; location games on networks; pure equilibria; large games |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00983085&r=hpe |
| By: | Jason Shachat; J. Todd Swarthout; Lijia Wei |
| 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; Nash Equilibrium; Experiment; Hidden Markov Model |
| JEL: | C92 C72 C10 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002048&r=hpe |
| By: | Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR.; Università di Napoli "Federico II" and CSEF) |
| Abstract: | Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand them, in spite of their recurrence in the last 25 years. In the pre-crisis period, however, there have been important exceptions – theoretical and empirical strands of research that largely laid out the basis for our current thinking about financial crises. Since 2008, a flurry of new studies offered several different interpretations of the US crisis: to some extent, they point to potentially complementary factors, but disagree on their relative importance, and therefore on policy recommendations. Research on the euro debt crisis has so far been much more limited: even Europe-based researchers – including CEPR ones – have often directed their attention more to the US crisis than to that occurring on their doorstep. In terms of impact on policy and regulatory reform, the record is uneven. On the one hand, the swift and massive liquidity provision by central banks in the wake of both crises is, at least partly, to be credited to previous research on the role of central banks as lenders of last resort in crises and on the real effects of bank lending and monetary policy. On the other hand, economists have had limited impact on the reform of prudential and security market regulation. In part, this is due to their neglect of important regulatory choices, which policy-makers are therefore left to take without the guidance of academic research-based analysis. |
| Keywords: | financial crisis, risk taking, systemic risk, financial regulation, monetary policy, politics |
| JEL: | G01 G18 G21 G28 H81 O16 |
| Date: | 2014–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:361&r=hpe |
| By: | Gautam Bose (School of Economics, Australian School of Business, the University of New South Wales); Lorraine Ivancic (School of Economics, Australian School of Business, the University of New South Wales); Evgenia Dechter (School of Economics, Australian School of Business, the University of New South Wales) |
| Abstract: | There is substantial experimental and empirical evidence to suggest that individual behaviour in bilateral or small-group interactions is affected by social norms. Further, social norms vary according to context. Previous research largely focuses on norms of fairness, not norms per se. We design an experiment to decouple norm-adherence from fairness. We find that (a) a group norm evolves and individuals cluster more tightly around it as they learn the average behaviour of the group, (b) actions further from this norm in a self-serving direction are less acceptable by others, and (c) when an agent is moved to a group with a different norm, s/he conforms quickly to the new norm. |
| Keywords: | group behaviour, norms, conformism, fairness, ultimatum game |
| JEL: | C72 C78 C92 Z13 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2014-21&r=hpe |
| By: | Hannu Salonen (Department of Economics, University of Turku) |
| Abstract: | We study non-cooperative link formation games in which players have to decide how much to invest in relationships with other players. A link between two players is formed, if and only if both make a positive investment. The cost of forming a link can be interpreted as the opportunity cost of privacy. We analyze the existence of pure strategy equilibria and the resulting network structures with tractable specifications of utility functions. Sufficient conditions for the existence of reciprocal equilibria are given and the corresponding network structure is analyzed. Pareto optimal and strongly stable network structures are studied. It turns out that such networks are often complete. |
| Keywords: | link formation games, reciprocal equilibrium, complete network |
| JEL: | C72 D43 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp89&r=hpe |
| By: | Pablo Martín-Aceña (Universidad de Alcalá,Madrid,Spain); Inés Roldán de Montaud (Consejo Superior de Investigaciones Científicas,Madrid,Spain) |
| Abstract: | This paper offers the history of the Banco Español de Puerto Rico from its creation in 1888 to its liquidation in 1913. The Banco Español was the sole note-issuing institution of the island until 1898, when Puerto Rico was transferred to the United States. The establishment of the Bank was plagued with difficulties and during its first decade of existence it met with diverse obstacles that hindered its financial development. However, it contributed to diversifying the underdeveloped banking structure of the colony, to bringing down the cost of credit, and to modernizing the island’s monetary system. The transfer of sovereignty was traumatic since the Bank lost its issue monopoly and had to adjust to US banking legislation. In 1905, its name was changed to Banco de Puerto Rico and its by-laws were reformed. The last years of the Bank’s life were prosperous and it once again made an important contribution to the island’s economy. All in all, the history of the institution is a mixture of errors and achievements, a history of setbacks and successes. |
| Keywords: | Puerto Rico, banks, financial system, economic development, Spain, United States of America. |
| JEL: | G2 N16 N26 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:1410&r=hpe |
| By: | Luca Polonio; Sibilla Di Guida; Giorgio Coricelli |
| Abstract: | We used eye-tracking to measure the dynamic patterns of visual information acquisition in twoplayers normal form games. Participants played one-shot games in which either, neither, or only oneof the players had a dominant strategy. First, we performed a mixture models cluster analysis to groupparticipants into types according to the pattern of visual information acquisition observed in a singleclass of games. Then, we predicted agents’ choices in different classes of games, and observed thatpatterns of visual information acquisition were game invariant. Our method allowed us to predictwhether the decision process would lead to equilibrium choices or not, and to attribute out-ofequilibriumresponses to limited cognitive capacities or social motives. Our results suggest theexistence of individually heterogeneous-but stable-patterns of visual information acquisition basedon subjective levels of strategic sophistication and social preferences. |
| Keywords: | game theory; strategic sophistication; social preferences; attention; eye-tracking |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/159867&r=hpe |
| By: | Shunji Ishihara (Faculty of Economics, The University of Tokyo) |
| Abstract: | This is a translation of Cassel's "Socialpolitik"(1902). Today this book is almost forgotten even in Sweden. But it had a great influence on public opinion in those days. We should pay attention to following four points in Cassel's discussion in this book. 1) Cassel criticizes (Manchester) liberalism. Market mechanism does not always function automatically. If man lets market behave freely, it leads often to degeneration in mankind rather than progress. So man has consciously to set up preconditions for full performance of market. According to Cassel, cooperative movement and labor movement can play a very important role in this context. State is also a bearer of such a role in complement. 2) On the other hand, he criticizes socialism such as Marxism. Even if man could abolish profits and distribute them among proletariats, man could not eradicate poverty in the society. Our wealth is too meager to give every member an enough portion. In addition such distribution can lead to exhaustion of capital for following economic growth. So we can become even poorer. 3) Cassel, in this way, emphasizes importance of economic growth. For him, social policy is policies for solving social problems through economic growth. Social policy is not a cost but a productive factor for the society. This means that social policy is benefit both for capitalists and for working class. So man can take social policy as an important means to overcome class conflicts and realize national solidarity. 4) We can take so-called Swedish model as a vision for harmonious society through economic growth. Moreover we can also notice prototype of solidarity wage policy and active labor market policy in policies which Cassel proposed for economic growth in this book. It is plausible that we consider Cassel's social policy as one of historical origins of Swedish model. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2014cj259&r=hpe |
| By: | Jason Shachat; J. Todd Swarthout |
| Abstract: | We report results from an experiment in which humans repeatedly play one of two games against a computer program that follows either a reinforcement or an experience weighted attraction learning algorithm. Our experiment shows these learning algo- rithms detect exploitable opportunities more sensitively than humans. Also, learning algorithms respond to detected payoff-increasing opportunities systematically; how- ever, the responses are too weak to improve the algorithms’ payoffs. Human play against various decision maker types does not vary significantly. These factors lead to a strong linear relationship between the humans’ and algorithms’ action choice propor- tions that is suggestive of the algorithms’ best response correspondences. |
| Keywords: | Learning, �Repeated games, �Experiments, �Simulation |
| JEL: | C72 C92 C81 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:journl:002151&r=hpe |
| By: | Murphy, Anne L. |
| Abstract: | As the market for the trading of the British state's debt developed during the eighteenth century, the Bank of England found itself in a difficult position. It was the self-styled guardian of public credit, an institution which stood aloof as mediator between the state and its creditors, and, at the same time, the location of a market that was often criticized for its supposed attempts to undermine the stability of the state. The Bank dealt with this seeming contradiction by attempting to create both physical and commercial separation between the business of managing the public credit and the business of trading the government's debt. This paper will show that these attempts were largely unsuccessful but that the implications of those failures for the credibility of Britain's public finances were not entirely negative. -- |
| Keywords: | Bank of England,credible commitment,financial markets,sovereign debt |
| JEL: | N23 G14 G21 H63 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eabhps:1405&r=hpe |
| By: | Jason Shachat; J. Todd Swarthout |
| Abstract: | We report results from an experiment in which humans repeatedly play one of two games against a computer program that follows either a reinforcement or an experience weighted attraction learning algorithm. Our experiment shows these learning algorithms detect exploitable opportunities more sensitively than humans. Also, learning algorithms respond to detected payoff-increasing opportunities systematically; however, the responses are too weak to improve the algorithms' payoffs. Human play against various decision maker types doesn't vary significantly. These factors lead to a strong linear relationship between the humans' and algorithms' action choice proportions that is suggestive of the algorithms' best response correspondences. |
| Keywords: | Learning, Repeated games, Experiments, Simulation |
| JEL: | C72 C92 C81 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002031&r=hpe |
| By: | Llerena Garrés, Francesc; Nuñez, Marina (Núñez Oliva) |
| Abstract: | On the domain of general assignment games (with possible reservation prices) the core is axiomatized as the unique solution satisfying two consistency principles: projection consistency and derived consistency. Also, an axiomatic characterization of the nucleolus is given as the unique solution that satisfies derived consistency and equal maximum complaint between groups. As a consequence, we obtain a geometric characterization of the nucleolus. Maschler et al. (1979) provide a geometrical characterization for the intersection of the kernel and the core of a coalitional game, showing that those allocations that lie in both sets are always the midpoint of certain bargaining range between each pair of players. In the case of the assignment game, this means that the kernel can be determined as those core allocations where the maximum amount, that can be transferred without getting outside the core, from one agent to his / her optimally matched partner equals the maximum amount that he / she can receive from this partner, also remaining inside the core. We now prove that the nucleolus of the assignment game can be characterized by requiring this bisection property be satisfied not only for optimally matched pairs but also for optimally matched coalitions. Key words: cooperative games, assignment game, core, nucleolus |
| Keywords: | Jocs cooperatius, 33 - Economia, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/228403&r=hpe |
| By: | Vanberg, Viktor J. |
| Abstract: | [Einleitung: Das Spannungsverhältnis zwischen Liberalismus und Demokratie] Zwischen den Idealen der Demokratie und des Liberalismus besteht, so scheinen nicht wenige ihrer jeweiligen Advokaten zu vermuten, ein inhärentes Spannungsverhältnis. Auf der liberalen Seite spricht ein Autor wie Randall Holcombe in seinem Buch 'From Liberty to Democracy' von 'Gefahren der Demokratie', die er darin sieht, dass mit ihrer Ausweitung regelmäßig eine Ausdehnung des Staates und ein Niedergang individueller Freiheit einhergehe, und er stellt die letztendliche Vereinbarkeit von Demokratie und einer freiheitlichen, marktwirtschaftlichen Ordnung in Frage. Ein anarcho-libertärer Autor wie Hans-Hermann Hoppe sieht in seinem Buch 'Democracy - The God That Failed' (2001) in der Demokratie die Quelle aller Sünden des modernen Wohlfahrtsstaates. Dem stehen Vertreter des Demokratieideals gegenüber, die ihrerseits den Verdacht hegen, dass für Liberale die Demokratie nur dann und solange akzeptabel sei, wenn bzw. solange sie 'liberale Entscheidungen' hervorbringe, und dass sie, wo dies nicht der Fall sei, einer autoritären Regierung als geringerem Übel den Vorzug geben würden. Dabei wird gern auf die sicherlich nicht sonderlich glückliche Berater-Rolle verwiesen, die liberale Ökonomen in der Zeit des Pinochet-Regimes in Chile gespielt haben. [...] -- |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1404&r=hpe |
| By: | Ilhom Abdulloev; Gil S. Epstein (Bar-Ilan University); Ira N. Gang |
| Abstract: | Some immigrants try to keep their ethnicity hidden while others become ever deeply more mired in their home culture. We argue that among immigrants this struggle manifests itself in the ethnic goods they choose to consume. Different types of ethnic goods have vastly different effects on immigrant assimilation. We develop a simple theoretical model useful for capturing the consequences of this struggle, illustrating it with examples of Central Asian assimilation into the Muscovite economy. |
| Keywords: | assimilation, migrants, culture, ethnic goods |
| JEL: | J15 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2014-03&r=hpe |
| By: | Kleemann, Linda; Neumann, Maximilian |
| Abstract: | Successful cooperation between development researchers and development policy makers and practitioners translates into better development policies, projects and programmes. Research is relevant if it can provide meaningful input for the practitioners. At the same time, practitioners have to be willing and able to use these findings to improve their work. Through continuous communication, evaluation and feedback cycles both parties should be able to gain additional insights and improve future outcomes. But how close is reality to this ideal state of collaboration between theory and practice? Development researchers are often said to be working in ivory towers - doing research for the sake of publications with results that are hardly relevant or applicable in practice. But is this necessarily so and is it the only reason for the lack of cooperation between research and practice? What role do personal communication, time horizons and the researchers fear of losing their academic reputation play? To answer this question, we developed two surveys, one among development researchers and one among development practitioners in Germany, asking them about the intensity and quality of cooperation and feedback linkages between research and practice. We also asked about the main obstacles and the expectations about the future of cooperation between the two groups. The questionnaires were published on the PEGNet website and contained 27 questions. The researcher questionnaire was sent to about 2000 development researchers in Germany and abroad in early 2014. Within three weeks 145 researchers answered the questionnaire. The practitioner questionnaire was distributed in 2013 (Kleemann and Böhme 2013). Although the results are not representative for the development research sector as a whole they provide some interesting insights into existing problems and what can be done about them. The results show that both researchers and practitioners are interested in cooperating more. Researchers in particular believe that better collaboration would be mutually beneficial, resulting in additional insights for their research and better development outcomes. From their point of view the current state of cooperation is unsatisfactory because of four main reasons: different interests, different time frames, poor communication and mistrust. The practitioners and researchers opinion on the main obstacles for cooperation coincide to a large extent, and in particular on the question of timing. Practitioners complain about the slowness of research wherefore they have to make decisions before the researchers can provide them with their findings (Bell and Squire 2014). Moreover, practitioners claim that researchers are mainly aiming at publishing their results and are therefore neglecting the applicability of their research. Hence, in order to improve the cooperation environment researchers and practitioners have to learn how to trust and respect each other, to communicate better and to find ways to handle differences in timing. -- |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkpb:74&r=hpe |