nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒08‒20
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. When Economics met Antitrust: The Second Chicago School and the Economization of Antitrust Law By Patrice Bougette; Marc Deschamps; Frédéric Marty
  2. Dominance Solvable Games with Multiple Payoff Criteria By Georgios Gerasimou
  3. Corrigendum to: “Discounted Stochastic Games with No Stationary Nash Equilibrium: Two Examples By Yehuda John Levy; Andrew McLennan
  4. The Bubble Game: A classroom experiment By Moinas, Sophie; Pouget, Sébastien
  5. Affective Utilities: A Rational Theory of Optimistic Bias in Asset Markets By Anat Bracha; Donald J. Brown
  6. Altruism, Anticipation, and Gender By Subhasish M. Chowdhury; Joo Young Jeon
  7. Evolutionarily stable strategies, preferences and moral values, in n-player Interactions By Alger, Ingela; Weibull, Jörgen
  8. Noncooperative Market Allocation and the Formation of Downtown By Yannai A. Gonczarowski; Moshe Tennenholtz
  9. Preconditions for an Informal Economy: 'Trucking and Bartering' in New Guinea By John D. Conroy
  10. Games induced by the partitioning of a graph By Michel Grabisch; Alexandre Skoda
  11. Central bank macroeconomic forecasting during the global financial crisis: the European Central Bank and Federal Reserve Bank of New York experiences By Alessi, Luci; Ghysels, Eric; Onorante, Luca; Peach, Richard; Potter, Simon M.
  12. Behavioral Perfect Equilibrium in Bayesian Games By Bajoori, Elnaz; Flesch, Janos; Vermeulen, Dries
  13. La décentralisation dans les pays en développement : une revue de la littérature - Decentralization in developing countries: A literature review By Emilie CALDEIRA; Grégoire ROTA-GRAZIOSI
  14. Understanding Fear of Failure in Entrepreneurship: A Cognitive Process Framework By James Hayton; Gabriella Cacciotti; Andreas Giazitzoglu; J. Robert Mitchell; Chris Ainge

  1. By: Patrice Bougette (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - Université Nice Sophia Antipolis (UNS) - CNRS : UMR6227); Marc Deschamps (BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS))
    Abstract: In this article,we use a history of economic thought perspective to analyze the process by which the Chicago School of Antitrust emerged in the 1950s and became dominant in the US. We show the extent to which economic objectives and theoretical views shaped antitrust laws in their inception. After establishing the minor influence of economics in the promulgation of US competition laws, we then highlight US economists' very cautious views about antitrust until the Second New Deal. We analyze the process by which the Chicago School developed a general and coherent framework for competition policy. We rely mainly on the seminal and programmatic work of Director and Levi (1956) and trace how this theoretical paradigm was made collective, i.e. the "economization" process took place in US antitrust. Finally, we discuss the implications, if not the possible pitfalls, of such a conversion to economics - led competition law enforcement.
    Keywords: Antitrust, Chicago School, Consumer Welfare, Monopolization, Efficiency
    Date: 2014–07–21
  2. By: Georgios Gerasimou (School of Economics and Finance, University of St Andrews)
    Abstract: Two logically distinct and permissive extensions of iterative weak dominance are introduced for games with possibly vector-valued payoffs. The first, iterative partial dominance, builds on an easy-to-check condition but may lead to solutions that do not include any (generalized) Nash equilibria. However, the second and intuitively more demanding extension, iterative essential dominance, is shown to be an equilibrium refinement. The latter result includes Moulin's (1979) classic theorem as a special case when all players' payoffs are real-valued. Therefore, essential dominance solvability can be a useful solution concept for making sharper predictions in multicriteria games that feature a plethora of equilibria.
    Keywords: Dominance solvability; Multicriteria games; Partial Dominance; Essential Dominance
    JEL: C72 D01
  3. By: Yehuda John Levy (Nuffield College, University of Oxford); Andrew McLennan (School of Economics, The University of Queensland)
    Abstract: Levy (2013) presents examples of discounted stochastic games that do not have stationary equilibria. The second named author has pointed out that one of these examples is incorrect. In addition to describing the details of this error, this note presents a new example by the first named author that succeeds in demonstrating that discounted stochastic games with absolutely continuous transitions can fail to have stationary equilibria.
    Date: 2014–07–17
  4. By: Moinas, Sophie; Pouget, Sébastien
    Abstract: We propose a simple classroom experiment on speculative bubbles: the Bubble Game. This game is useful to discuss about market efficiency and trading strategies in a financial economics course, and about behavioral aspects in a game theory course, at all levels. The Bubble Game can be played with any number of students, as long as this number is strictly greater than one. Students sequentially trade an asset which is publicly known to have a fundamental value of zero. If there is no cap on asset prices, speculative bubbles can arise at the Nash equilibrium because no trader is ever sure to be last in the market sequence. Otherwise, the Nash equilibrium involves no trade. Bubbles usually occur with or without a cap on prices. Traders who are less likely to be last and have less steps of reasoning to perform to reach equilibrium are in general more likely to speculate.
    Keywords: financial markets, speculation, bubbles
    Date: 2014–07–07
  5. By: Anat Bracha (Federal Reserve Bank of Boston); Donald J. Brown (Dept. of Economics, Yale University)
    Abstract: The equilibrium prices in asset markets, as stated by Keynes (1930): "...will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced." We propose a descriptive theory of finance explicating Keynes' claim that the prices of assets today equilibrate the optimism and pessimism of bulls and bears regarding the payoffs of assets tomorrow. This equilibration of optimistic and pessimistic beliefs of investors is a consequence of investors maximizing affective utilities subject to budget constraints defined by market prices and investor's income. The set of affective utilities is a new class of non-expected utility functions representing the attitudes of investors for optimism or pessimism, defined as the composition of the investor's attitudes for risk and her attitudes for ambiguity. Bulls and bears are defined respectively as optimistic and pessimistic investors.
    Keywords: Risk, Ambiguity, Irrational Exuberance
    JEL: D81 G02 G11
    Date: 2013–06
  6. By: Subhasish M. Chowdhury (University of East Anglia); Joo Young Jeon (University of East Anglia)
    Abstract: Existing studies connect overall wellbeing with both payoffs and related anticipation, but it is not explored whether altruistic behavior as well as anticipation about the same may differ across gender and across income levels. We study altruistic behavior and the corresponding anticipation under a pure income effect with a focus on gender. In a dictator game we vary the common show-up fee of both the dictator and the recipient in each of the between-subject treatments, keep the amount to be shared the same, and incentivize recipients to anticipate the amount given. Overall, female dictators give more than their male counterparts but this is driven specifically by high show-up fees. Male recipients, on average and across all show-up fees, anticipate more than the amount female recipients anticipate. They also anticipate higher amounts than what males give as dictators; females do not show such significant pattern. The results reiterate context-driven behavior and lower payoff anticipation in females, and overconfidence in males.
    Date: 2013
  7. By: Alger, Ingela; Weibull, Jörgen
    Abstract: We provide a generalized definition of evolutionary stability of heritable types in arbitrarily large symmetric interactions under random matching that may be assortative. We establish stability results when these types are strategies in games, and when they are preferences or moral values in games under incomplete information. We show that a class of moral preferences, with degree of morality equal to the index of assortativity are evolutionarily stable. In particular, selfishness is evolutionarily unstable when there is positive assortativity in the matching process. We establish that evolutionarily stable strategies are the same as those played in equilibrium by rational but partly morally motivated individuals, individuals with evolutionarily stable preferences. We provide simple and operational criteria for evolutionary stability and apply these to canonical examples.
    Keywords: Evolutionary stability, assortativity, morality, homo moralis, public goods, contests, helping, Cournot competition.
    JEL: C73 D01 D03
    Date: 2014–06
  8. By: Yannai A. Gonczarowski; Moshe Tennenholtz
    Abstract: Can noncooperative behaviour of merchants lead to a market allocation that prima facie seems anticompetitive? We introduce a model in which service providers aim at optimizing the number of customers who use their services, while customers aim at choosing service providers with minimal customer load. Each service provider chooses between a variety of levels of service, and as long as it does not lose customers, aims at minimizing its level of service; the minimum level of service required to satisfy a customer varies across customers. We consider a two-stage competition, in the first stage of which the service providers select their levels of service, and in the second stage --- customers choose between the service providers. (We show via a novel construction that for any choice of strategies for the service providers, a unique distribution of the customers' mass between them emerges from all Nash equilibria among the customers, showing the incentives of service providers in the two-stage game to be well defined.) In the two-stage game, we show that the competition among the service providers possesses a unique Nash equilibrium, which is moreover super strong; we also show that all sequential better-response dynamics of service providers reach this equilibrium, with best-response dynamics doing so surprisingly fast. If service providers choose their levels of service according to this equilibrium, then the unique Nash equilibrium among customers in the second phase is essentially an allocation (i.e. split) of the market between the service providers, based on the customers' minimum acceptable quality of service; moreover, each service provider's chosen level of service is the lowest acceptable by the entirety of the market share allocated to it. Our results show that this seemingly-cooperative allocation of the market arises as the unique and highly-robust outcome of noncooperative (i.e. free from any form of collusion), even myopic, service-provider behaviour. The results of this paper are applicable to a variety of scenarios, such as the competition among ISPs, and shed a surprising light on aspects of location theory, such as the formation and structure of a city's central business district.
    Date: 2014–03
  9. By: John D. Conroy (Crawford School of Public Policy, The Australian National University)
    Abstract: This fourth paper, in a series on the theme of the informal economy, considers the extent to which premodern trade in Melanesia constituted any preparation for engagement with the market. It reviews explanations of trade and exchange in 'aboriginal' societies, from Adam Smith in the eighteenth century and the German historical school in the nineteenth, to their modern heirs and critics. The view of trade as due to a natural human tendency to 'truck and barter' is counter-posed against a conception of exchange as the product of socially regulated customs, in the manner of The Gift. Malinowski's account of the kula, and its (mis)interpretation by Van Leur, the historian of Asian trade, raises the question whether Melanesia possessed any counterpart of the travelling Asian peddler. To consider this question, the paper examines the traditional trading systems of regions which would later become the hinterlands of three modern towns (Rabaul, Port Moresby and Goroka). In preparation for later discussion of these towns' colonial experience, the paper surveys the traditional trade of the New Guinea interior, the long-distance seaborne trade of the coasts and islands, and the particular case of the Gazelle Peninsula. It draws conclusions which throw some light on the question of Asian-style 'peddling' in Melanesia. Finally, the paper considers how Keith Hart's concept of 'informality', derived from Weber's notion of rational/legal bureaucracy, could be seen as applicable to the early colonial setting of New Guinea. It finds a piquant correspondence between a highly bureaucratized German New Guinea and the Weberian original, located back in Bismarck's Berlin.
    Date: 2013–04
  10. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Alexandre Skoda (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: The paper aims at generalizing the notion of restricted game on a communication graph, introduced by Myerson. We consider communication graphs with weighted edges, and we define arbitrary ways of partitioning any subset of a graph, which we call correspondences. A particularly useful way to partition a graph is obtained by computing the strength of the graph. The strength of a graph is a measure introduced in graph theory to evaluate the resistance of networks under attacks, and it provides a natural partition of the graph (called the Gusfield correspondence) into resistant components. We perform a general study of the inheritance of superadditivity and convexity for the restricted game associated with a given correspondence. Our main result is to give for cycle-free graphs necessary and sufficient conditions for the inheritance of convexity of the restricted game associated with the Gusfield correspondence.
    Keywords: Communication networks;Coalition structure;Cooperative game; Strength of a graph
    Date: 2012–08–29
  11. By: Alessi, Luci (Federal Reserve Bank of New York); Ghysels, Eric (Federal Reserve Bank of New York); Onorante, Luca (Federal Reserve Bank of New York); Peach, Richard (Federal Reserve Bank of New York); Potter, Simon M. (Federal Reserve Bank of New York)
    Abstract: This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The paper is the result of a collaborative effort between the two institutions, allowing us to study the time-stamped forecasts as they were made throughout the crisis. The analysis does not focus exclusively on point forecast performance. It also examines density forecasts, as well as methodological contributions, including how financial market data could have been incorporated into the forecasting process.
    Keywords: macro forecasting; financial crisis
    JEL: B41 E32 G01 N20
    Date: 2014–07–01
  12. By: Bajoori, Elnaz; Flesch, Janos; Vermeulen, Dries
    Date: 2013
  13. By: Emilie CALDEIRA (Université d'Auvergne); Grégoire ROTA-GRAZIOSI (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: Cet article propose une revue de la littérature consacrée à la décentralisation dans les pays en voie de développement. Reprenant la distinction des fonctions de l’État établie par Musgrave (allocation redistribution et stabilisation) ainsi que deux principes généraux - le principe de proximité politique et celui de compétition – nous établissons une grille de lecture de la littérature étudiée. Un bilan des études empiriques est également établi. La conclusion souligne certaines questions relatives aux travaux empiriques, qui appellent de plus amples investigations. This article offers a literature review on decentralization in developing countries. Considering the three economic functions of the State pointed out by Musgrave (stabilization, distribution and allocation) and two general principles - the proximity and the competition principles- we establish a reading grid of the literature studied. A review of empirical studies is also established. The conclusion underlines certain issues relating to empirical studies that call for further investigations.
    Keywords: Public Economics; State and Local Government; Economic Development; Institutional Arrangement.
    JEL: O17 O1 H7 H
  14. By: James Hayton (Warwick University Business School); Gabriella Cacciotti (Warwick University Business School); Andreas Giazitzoglu (Newcastle University); J. Robert Mitchell (Ivey Business School, Canada); Chris Ainge (Ivey Business School, Canada)
    Abstract: There is a broadly held assumption within the entrepreneurship literature that fear of failure is always and only an inhibitor of entrepreneurial behavior. However, anecdotal evidence and psychological theory suggest that this assumption is flawed. If fear stimulates greater striving in some cases or situations, then perhaps it can be a friend as much as a foe. The motivating value of fear may have consequences for the reactions, decisions, health and well-being of the entrepreneur. Unfortunately, a lack of rigorous conceptualization of the construct is a barrier to understanding such consequences. We present a grounded theoretic framework of the antecedents, moderators and consequences of fear of failure with significant implications for theory and future research.
    Keywords: entrepreneurship, fear of failure, psychology, motivation
    JEL: L26
    Date: 2013–05–03

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